CONTINENTAL-UNITED MERGER WORRIES GUAM WORKERS

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Some of Continental’s 1,400 Guam employees could lose jobs

By Gaynor Dumat-ol Daleno HAGÅTÑA, Guam (Pacific Daily News, May 5, 2010) - There could be job losses when the marriage between Continental and United Airlines results in combining their operations, Continental’s chief executive officer acknowledged in a letter to Continental’s employees.

What’s not clear is how many, if any, of those job losses would affect Guam, where Continental Airlines subsidiary Continental Micronesia employs about 1,400 people.

It’s also unclear whether Continental Micronesia will mirror the new name of its parent company, which will change from Continental Airlines to United Airlines.

"Decisions on (Continental Micronesia’s) corporate structure, brand and operating certificate will be made as part of the merger integration planning process," wrote Continental Airlines CEO Jeffery Smisek.

"Continental Micronesia has been an important part of Continental for many years, and is poised to benefit from United’s large presence in Hawaii, the West Coast, and across Asia," according to the question-and-answer portion part of Smisek’s letter.

After the merger receives regulatory approval, which Continental Airlines expects to occur late this year, there could be job losses, states Smisek’s May 3 letter, which went out to Continental employees on Guam, also.

Employees could be let go as both airlines combine and eliminate redundant positions, according to the CEO’s letter.

"This merger will not have an immediate impact on your job," Smisek wrote. But he added job shedding could occur as both airlines’ operations merge, which "could take us until the first half of 2012."

Continental Micronesia injects about US$320 million both in direct and indirect spending into the local economy, the airline has stated, or the equivalent of more than half the government of Guam’s budget for a year.

"As always, I want to be up front with you. Mergers do result in some job losses, particularly in non-operational positions. That part is painful, but in the long run, the merger will allow us to grow and prosper as a strong competitor, providing opportunities for advancement and the creation of new jobs," Smisek wrote.

"As always, we will do everything we can to mitigate job losses and work with those affected by the merger."

Smisek’s letter is the first detailed comment from Continental corporate to its employees, which total about 43,000 worldwide.

Before the two airlines signed the merger deal over the weekend, both signed confidentiality agreements that kept them from talking publicly, Smisek wrote. Merger details, however, leaked to national media anyway -- days ahead of both airlines’ official announcements.

"Now that we’ve made this announcement and I’m free to talk to you again, you’re going to hear from me directly, openly, honestly and regularly, just like you did before this whole process started," Smisek wrote.

"I know this decision is emotional for all of us, but it’s the right thing to do for our future. So while many things will be changing, two things aren’t going to change: our dedication to running a clean, safe and reliable airline and our working together culture of treating each other, and customers, with dignity and respect, and open, honest and direct communication," Smisek wrote.

He wrote that Continental’s decision to merge with United stems from consolidations among airlines, not only in the United States, but across the globe.

"We do not want to be left behind, and we need to merge while our best partner, United, is still available," according to Smisek.

Before the marriage, Continental was the world’s No. 5 largest airline, and United was No. 3. With the marriage, they become the world’s largest.

And the time is right for the airline industry’s biggest marriage, according to Smisek.

In early 2008, when Continental considered a possible merger, the financial crisis was beginning, oil prices were skyrocketing, capital markets were distressed and travel demand was beginning to drop, so the risks of a merger outweighed the rewards, Smisek said.

"Today, the economy is beginning to recover, oil prices, though high, are at manageable levels, the capital markets are open to us and demand is picking up. So now, the rewards of a merger outweigh the risks."

"The path is cleared for us to take a decisive step -- merging and creating the greatest airline in the world -- that will help secure our future."

The combined United Airlines will have 10 hubs, including hubs in the four largest cities in the U.S.: New York/Newark; Los Angeles; Chicago; and Houston. It will also have hubs in Cleveland, Denver, Guam, San Francisco, Tokyo and Washington, D.C., Smisek wrote.

Mary C. Torres, acting executive manager at the A.B. Won Pat Guam International Airport, said it’s too early to tell what impact the consolidation of United and Continental may have on Guam and the rest of the Micronesia region.

"Currently, both United and Continental share the same alliance and have numerous code-share agreements, but none of them involve Guam," Torres said. "Considering our recent experience with the Northwest-Delta merger, we are hopeful it will result in sustaining or increasing their business plan for the region."

When Delta Airlines merged with Northwest, Guam saw Delta enter the Guam travel market.

Smisek said it "was necessary to locate the (merged United and Continental headquarters) in Chicago to get the transaction accomplished."

United is Chicago-based, while Continental’s headquarters is in Houston. The merged company will still have a huge presence in Houston, according to Smisek.

In Chicago yesterday, officials unveiled the new United Airlines logo, which has shades of Continental’s old self.

The combined airlines will use Continental’s blue logo, which provides imagery of its global reach.

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