Monday, April 26, 2010

Would Anyone Miss the Continental Brand Name?
April 26, 2010, 5:58 PM ET. T

The possibility of moving Continental’s headquarters to Chicago from Houston is causing some political turbulence down in Texas.

Rep. Sheila Jackson Lee, a Houston Democrat, held a news conference today outside of Continental’s headquarters hoping to rally fellow Texans behind the airline, should it merge with Chicago-based United.

“This may not be Hurricane Ike, but it’s a major storm of the business/economic variety for the entire Houston region. That makes it an “all hands on deck” moment for our city, state and congressional leadership,’’ reads Friday’s editorial in the Houston Chronicle.

Interestingly, you don’t see anyone rallying to keep the Continental name.

Under the latest merger terms being negotiated between the two airlines, United would be the surviving brand, meaning that the Continental name could be headed for the dustbin of airline history – one that is overflowing with discarded brands like Eastern Airlines and Piedmont Airlines.

Continental Airlines was founded in 1934, under the name Varney Speed Lines (Its first flight was a 530-mile route from Pueblo, Colorado to El Paso, Texas with three stops along the way. The company assumed the Continental name in 1937. It acquired Pioneer Airlines in 1956 and merged with Texas International, which was owned by airline investor Frank Lorenzo, in 1982

What is curious is that, Continental has as strong, if not a stronger brand, than United in many markets.

“Continental generally has a better brand, does well in customer surveys and does better in the NY market which is a key area that the combined company would seek to gain market share,’’ Hunter Keay, an airline analyst at Stifel Nicholaus , tells Deal Journal.

The United brand may have an edge over Continental in the West Coast and in China.

“United is better known around the world.” says Helane Becker, an airline analyst at Jesup & Lamont, a small New York brokerage and investment bank

If it’s effectively a toss-up between the two brands, other considerations might come into play, like the fact that United is headquartered in the home city of President Barrack Obama or the fact that Continental’s current chief Jeff Smisek may end up the CEO of the combined companies.

“Compromise is part of any merger talks,’’ says Becker.

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