NEW YORK -- Continental Airlines and the parent of United concluded their merger Friday to form United Continental Holdings Inc., the world's largest carrier.
Shares of United Continental Holdings began trading under a new symbol on the New York Stock Exchange. The shares jumped more than 4 percent to close at $24.70.
But while a jubilant management team touted the new company's global breadth and its stronger balance sheet, pilots warned that there was still work ahead before the combination's potential could be fully realized.
"While the jovial mood of the new United management team is understandable ... absent a pilot contract ratified by the pilots of both airlines, United will not achieve touted synergies from this merger," said the Washington-based Air Lines Pilot Association in a statement.
Negotiations between pilots and management are bogged down over company plans to increase its outsourcing for regional flying and to use more aircraft with greater than 50 seats. Both goals would likely lead to a decrease in jobs.
The old United outsourced much of its regional flying, but Continental was restricted by a labor agreement from using larger jets.
"We have been hampered and competitively disadvantaged because the biggest regional jets that we could fly are 50-seaters," United Continental Chief Executive Jeff Smisek said during a media briefing. "That has not been for us a competitive product."
Unhappy pilots can cause major headaches for airlines and have complicated past mergers to protest compensation, benefits or management integration plans.
US Airways Group is, famously, still trying to integrate its pilots with those of America West, which it acquired in 2005. The pair essentially still operate as two separate carriers, so the deal hasn't yielded the revenue and cost improvements expected to come with integration.
But CEO Smisek said he hopes to have joint collective-bargaining agreements with all United Continental union groups within the next 12 to 18 months.
A day before the merger was complete, the union representing some 9,500 Continental flight attendants backed a proposed 26-month contract with the company, saying it would protect its members during the merger.
Flight attendants for United are still in talks.
Investors, judging from the initial gains in United Continental shares, are optimistic.
The investment firm JPMorgan Chase initiated its coverage for the company with an overweight rating and a $34 price target.
"We continue to envision a prosperous 2011 for U.S. airlines," the firm said in a note to clients.
United and Continental agreed to enter the $3.15 billion merger in May, combining two disparate route systems into one with a global footprint. United brings a strong trans-Pacific presence that Continental lacked, while Continental has more routes to Latin America.
The two carriers will continue to operate separately for up to 18 months while they seek U.S. approval for a single operating certificate.
As a corporate entity, United Continental begins with $9 billion in unrestricted cash and annual pro forma revenue of $31.4 billion, based on the 12 months ended June 30, the company said.
It expects to realize between $1 billion and $1.2 billion in annual cost savings by 2013, including $800 million to $900 million in incremental annual revenue through expanded service.
Smisek, the former chief executive of Continental, will lead the new airline, while Glenn Tilton, the former head of UAL, will act as non-executive chairman of the board.
The company is headquartered in Chicago.