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5/4/2010
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Merged United-Continental Has Windows 7 To Consider

Even though it's a OS generation behind, Continental's recent success with Windows Vista may put it in the IT pilot's seat after its merger with United Airlines.

The United-Continental "merger of equals" is expected to deliver incremental net synergies of $1.0 billion to $1.2 billion per year by 2013, according to Glenn Tilton, Chairman, president, and CEO of UAL Corporation, speaking in a conference call to analysts.

But it will cost $1.2 billion over the next three years to make that happen. "There are significant one-time costs … principally around the technology transition, which is quite expensive, and the fleet harmonization which is quite expensive as well," said Jeff Smisek, chairman, president and CEO of Continental Airlines, Inc.

"That's basically one year's synergies as a one-time cost, and then the synergies are perpetual," added Smisek. "It's a pretty good trade."

The combined airline expects $800 to $900 million in annual revenue synergies from increased scope and scale of the combined route network, greater ability to match capacity with demand, higher attractiveness to corporate customers, and greater ability to match appropriately-sized aircraft to specific routes.

Cost synergies are to deliver an additional annual benefit of $200 to $300 million. "We expect unit cost synergies will be achieved principally by streamlining corporate overhead functions; eliminating duplicative marketing, sales and advertising expenses; and streamlining our operational IT function," said Smisek.

The combined airline "will have the financial strength to enhance customers' travel experience by enabling it to invest in globally competitive products, upgrade technology, refurbish and replace older aircraft, and implement the best-in-class practices of both airlines," the articles said in a joint statement.

In any "bake-off" between the IT departments of United and Continental, Microsoft may have an inside edge. According to a Microsoft case study published in January 2009, "Continental Airlines prides itself as one of the leanest IT organizations in its industry," with only seven percent of its 192 locations having local, dedicated IT support.

Continental was an early adopter of Windows Vista for its "hardware and language-independent imaging, self-healing capabilities, and security enhancements," according to the case study. As of 2009, the airline had 57 core applications requiring 27 images; Microsoft System Center Configuration Manager and Windows Vista Enterprise offered the potential to consolidate to a single core image for all workstations. Details regarding the current status of the Windows Vista deployment, or whether it had been moved to Windows 7, were not immediately forthcoming from the airline.

At the time of the case study, Continental Airlines had 18,500 client PCs, 80 percent desktops and 20 percent portable computers, with 22 percent penetration of Windows Vista. When contacted, Microsoft was not able to comment on the subject.

Moving on from Vista, Continental is currently in the process of deploying Windows 7 as an early adopter and joint development program customer of Microsoft, according to Christen David, a spokeswoman for the airline. "As far as the combined company is concerned, it is too early to determine which operating system will be utilized," wrote David in an e-mail.

United has maintained a much lower profile in the technology trades. The company appointed Keith Halbert to senior vice president and CIO in December 2007. Halbert was formerly VP and CIO at Electronic Data Systems (EDS). Continental’s Senior VP and Chief Information Officer is Ron Anderson-Lehman.

United Continental Holdings will operate as United Airlines, combining Continental's livery, logo and colors with the United name. United shareholders will own approximately 55 percent of the equity in the combined company, valued at the time of the merger announcement at $8 billion. The company will be headquartered in United's hometown of Chicago, and the company's largest hub will be in Continental's hometown of Houston.

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