this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> suzanne: good evening, everyone. susie gharib is on assignment tonight. there may soon be a new behemoth flying the friendly skies. >> tom: united airlines and continental airlines announced today they're merging in a $3 billion stock swap. if approved by regulators and shareholders, the combined carrier would command one out of every five passenger seats in u.s. skies. >> suzanne: tom, negotiations for the united-continental combination resumed last month. those talks revived a deal that fell apart two years ago. continental executives walked away then because they were worried about united's financial health as high oil prices were crippling the industry. >> reporter: at a news conference in new york today, the companies insisted the deal is a true merger of equals. but united shareholders will get a majority stake, and the airline will be based in united's hometown of chicago. still, it will be run by current continental c.e.o. jeffery smisek and the new airline will keep the united name along with the continental logo. today, smisek said he got motivated to seek a marriage with united when he learned the airline was courting rival u.s. airways. >> i realized that the best partner for continental, and the best way to grow our combined airline and provide the foundation of stability for all of our constituencies, was to merge. and i saw him going off to merge with someone else. and i felt that i was the far prettier girl and so i gave him a call. >> reporter: united c.e.o. glenn tilton will serve as non-executive chairman of the combined company for the next two years. he explained why the marriage works better in the current environment than it would have a few years ago, when the economy was on the brink of a downward spiral. >> today, the companies are ready for that journey. we are financially sound, we have much improved balance sheets, and our cash positions are individually and now collectively industry leading. >> suzanne: the airlines said annual cost savings and new revenue from the tie-up could reach more than $1 billion by 2013. and, while they expect minimal layoffs, there will be some job cuts at both companies. >> tom: the merger between united and continental would dwarf the recent marriage of delta and northwest. in the cutthroat airline industry, size is becoming the means to survival. as diane eastabrook reports, another mega-merger could make it tough for smaller players like american and u.s. airways to compete. >> reporter: the marriage of united and continental airlines would create a carrier flying to 370 destinations around the globe, putting it just ahead of delta which flies to 350 cities. access is what appeals to the lucrative business customer, and that, says fitch rating analyst william warlick, is the name of the airline game. >> by virtue of the fact that you have a much larger network, have significant complimentary schedules, fare structure, you're going to attract more business travel into this airline. >> reporter: courting business travelers is crucial to airlines, especially in turbulent times, and the industry is emerging from one of the worst downturns in aviation history. the recession forced airlines to cut capacity nearly 7% last year. while traffic has been improving, experts say carriers remain vulnerable to fuel price spikes and another pull-back in travel. joseph schwieterman from depaul university's chaddick institute says larger companies like a combined united-continental could adapt to that volatility better than smaller competitors like american and u.s. airways. >> both u.s. airways and american airlines have some major strategic decisions to make. it's not that they need to do anything right away, but the forces here are clearly for a global synergy. and u.s. airways does not have a particularly low cost structure and they are competing head to head with these giants. >> reporter: warlick agrees the competitive forces at play now could make it harder for the u.s. to sustain four major carriers. >> ultimately, we probably will move to three major airline groupings and then, of course, the regional airlines continuing to put pressure on the legacy carriers. >> reporter: but stronger, bigger carriers could also mean much higher fares for consumers. and that's likely to be something the u.s. justice department will consider when deciding if united and continental can merge. diane eastabrook, "nightly business report", chicago. >> suzanne: here are the stories in tonight's "n.b.r. newswheel". stocks bounced back from friday's lows; the dow industrials were up 143 points-- it's biggest one-day rally since february-- the nasdaq was up 37.5, and the s&p 500 closed over the 1,200 level, up more than 15 points. volume on the big board and the nasdaq backed off friday's pace. the market was responding to more evidence of growing confidence in the economy. consumer spending in march rose for a sixth straight month as americans dipped into savings. the commerce department says spending rose 0.06%. personal income edged up half that much. some of that spending was for cars. vehicle sales for april were up from a year ago, but down slightly from march. ford, chrysler, and toyota all saw double-digit increases of around 25%. general motors had a smaller increase of nearly 7%, but take out brands that g.m. is selling or phasing out, and sales were up 20%. the nation's manufacturing sector expanded in april at the fastest pace in nearly six years. the institute for supply management's manufacturing index came in at 60.4. readings above 50 signal expansion. >> susie: still ahead on the program, my interview with warren buffett here at the berkshire hathaway annual meeting. the oracle of omaha tells me the economy is picking up and why he supports goldman sachs. >> tom: there's still no end in sight for the massive oil spill in the gulf of mexico. crude continues spewing from the offshore well site. b.p.'s c.e.o. said the oil company would pay all necessary and appropriate clean up costs associated with the spill in the gulf of mexico. that comment comes as the company faces increasing pressure to find a way to control the flow of oil coming from the drill site. jeff yastine has an update on the growing spill, and efforts to contain the damage. >> reporter: day 13 of the spill. already, according to some reports, water lapping the louisiana coast in some areas has an oily sheen. the main slick still appears to be offshore, although coast guard officials say it may move onto the region's shoreline as early as tonight. b.p. c.e.o. tony hayward said the oil company would accept responsibility for paying for the spill. >> this wasn't our accident. it was a drilling rig operated by another company, their rig, their people, their processes. we are responsible not for the accident, but for the oil, for dealing with it and cleaning the situation up. >> reporter: b.p.'s chief operating officer doug suttles reported no success yet on reducing the flow from the well. and mother nature isn't helping efforts to contain the growing slick. >> we had seas as high as 17 feet at the location and our skimming fleet had to return to shore. it's currently en route back to the location and we expect it to be skimming again tomorrow. also, disbursement flights have been suspended due to the weather at this time. >> reporter: florida's environmental regulator says the length of the clean up depends on how quickly b.p. can stop the spill. >> my concern about this spill, it goes back to cutting off the discharge. we may see a landfall, but because there's a continuing discharge, after we clean it up, there may be yet another landfall. what are the various containment efforts underway and where do they stand? >> there's two that are occurring pretty much simultaneously. the first we've read about these containment domes, there's three of them. the first is finished, they're being constructed at louisiana shipyard. the first one is going on a ship going to be over the site and they hope to have that one and other two which are supposed to be finished tomorrow over the site and in place some time this weekend. of course lot of that depends on the weather. the other part of the containment effort the permanent containment effort, bp said today that they have started drilling this relief well to a depth -- take about 60 toed 0 days according to the reports but to a depth of 17,000 feet to tap in to that old pipe then they will pour in the cement and other materials to permanently cap this well. >> permanent cap still three months off at this point. >> potentially. >> bs talking about equipment failure potentially for triggering this blow off. what do we know about any official investigation? >> the department of the interior as well as department of homeland security have a joint investigation going. of course, it will be awhile before we see any results. interestingly, the "wall street journal" had a report from a federal study that about half of the blow outs that have occurred, usually these are more minor type incidents that occurred in the gulf of mexico have come from what they call improper cementing operations. when they're pouring cement around the drill pipe. >> that has put the focus on halliburton which is the company that did the cementing in this particular site. we saw bp shares continue to move lower, we have seen some of those involved in this, such as trans ocean find a few buyers, markets are trying to gauge how much -- >> the big problem is, really for bp, because they're going to be on the hook for the majority of these costs. interestingly in washington late today, a trio of democratic senators are talking about making some changes to federal law and raising the economic damages, non-containment, non-clean up costs from 57 million which is -- 75 million to $10 billion. >> thank you, jeff. >> sounds like the buying was broad based today and it looks like it was the fourth best day for the dow this year, not a bad way to start off may. >> no, not at all. may gets underway with some buying, how about that. let's take a look at tonight's market folk is us. a day of broad-based buying helped make up for friday's losses, thanks to strong auto sales, manufacturing data, and rising consumer spending. that trio of good economic reports that we mentioned in the "newswheel" led investors into commercial real estate with the wilshire real estate e.t.f. hitting new post-recession highs. the airline merger, along with a big rally in alaska airlines, helped push up transportation stocks. homebuilders rallied, but on lighter volume. and consumer discretionary stocks rebounded nicely. as jeff just reported, efforts continue to cap off the oil leak in the gulf of mexico. at the same time, the clean up effort is picking up. nalco makes dispersant chemicals which b.p. will use. shares saw 18 times their usual volume, jumping to a two and a half year high. the firm is increasing production. clean harbors is expected to see business pick up. a credit suisse analyst expects business from this spill to continue for years. today, shares did 20 times their usual volume, rallying to a new all-time high. basic material stocks such as australian miners were the weakest in the market. the government down under plans to introduce a new tax on mining profits. it could be as high as 40%. the two biggest australian miners, rio tinto and b.h.p. billiton, saw huge volume today over concerns about new taxes. u.s. coal miner peabody is one to watch as it has a $4 billion deal to buy an australian iron ore miner. also putting some pressure on mining stocks was china's newest effort to slow bank lending. for the third time this year, china has increased how much money banks have to keep in reserve. meantime, puerto rico is turning out to be a hot spot for banking. popular has been showing up in the most active list recently. today it comes after expanding its presence in puerto rico, buying assets of one of three banks there that failed last week. b.p.o.p. shares were weaker today. volume has picked up since mid-april when it raised money to expand. fellow puerto rican banks doral and oriental also have been looking to expand. doral's offer to buy some of the failed banks wasn't high enough. but oriental's was. all three stocks were lower. speaking of buyouts, the market was looking for this one: a higher offer for car rental company dollar thrifty. hertz has offered $1.3 billion for it. avis says it wants to make a substantially higher offer. dollar already has been offered $41 per share from hertz. but dollar shares have rallied over that buyout price. hertz stock was weaker today on the coming competitive bid from avis, which was also down. looking ahead to friday's reports on jobs, temporary workers have seen hiring gains for the past few months. staffing firm administaff sees demand picking up. the firm's first quarter profit was a surprise. it saw an increase in its recruiting business and the average pay for the same group of temp workers was up too. shareholders took these as positive signs, bidding shares up 24% to an 11-month high. finally, we want to correct two stock price changes we featured on friday's "focus". alpha and omega semiconductor and convio went public thursday. due to data errors we had the wrong stock price changes and we apologize. here are tonight's closing prices: alpha started at $18, convio initially priced at $9 per share. and that's tonight's "market focus". >> suzanne: billionaire investor warren buffett says the economy is beginning to show real signs of strength. and he sees a pick-up in spending at his consumer-related businesses. buffett talked about the economic rebound this weekend at berkshire hathaway's annual meeting. susie gharib caught up with the oracle of omaha at the shareholder extravaganza. >> this is our version of american idol. >> susie: warren buffett has been hosting this shindig for decades. but this year was different: there were thousands of newcomers. some came because of their ties to burlington northern, the big railroad buffett bought a few months ago. >> okay, join in. ♪ i've been working on the railroad. >> susie: others got a ticket in because berkshire stock was cheap enough to buy, thanks to an unprecedented stock split. but for whatever reason they came, they were looking for the same thing: sage investment advice from the oracle of omaha. >> for the pilgrimage, and for the knowledge of warren buffett. >> i'm kind of curious to know what he's going to say about the financial markets with the banking industry if they're going to do regulation. >> i'm here because warren buffett exemplifies sort of the best of business values. >> susie: 40,000 people attended-- a record. and the mood was hopeful. partly because berkshire "class a" stock is up almost 60% from its lows last march when it hit $75,000. also, because buffett told shareholders he's seeing an uptick in the economy. >> business is picking up. when they talk about creating jobs, what creates jobs is demand. i mean, somebody wants to come in and buy carpets, we hire carpet workers, and that's starting to happen now. and it's noticeable now. >> susie: so how are your berkshire businesses doing? so many of them are connected to housing and the consumer. >> our businesses are generally doing pretty well, but still, the ones that are housing related are lagging behind, there's no question about that. >> susie: are you ready to start hiring again? >> oh we are hiring. we're hiring people up at burlington northern. we're hiring people at marmon. we're hiring people at iscar, so we are hiring people. >> susie: buffett is so confident that he's looking to do more acquisitions. he has plenty of shopping money, $20 billion in cash. >> i've got a gleam in my eye, always do, susie. yeah, no i sure... i love buying businesses, and we'll just keep adding over time. >> susie: the highlight of what's known as woodstock for capitalists is the q&a session for shareholders. for five hours, buffett downed his favorite cherry cokes and fielded questions on everything from the greek debt crisis-- he expects high drama, but not disaster-- to inflation-- he said he bet his life on higher inflation, a lot higher. the one topic buffett was eager to talk about: his $5 billion investment in goldman sachs. despite a government investigation into a goldman mortgage deal called abacus, buffett still supports the firm's c.e.o. >> i have total confidence in lloyd blankfein, both of us do, in his integrity and his ability. i mean, he is a great manager and they are losing the public relations war at the present time. i mean, they got out of the gate late when that announcement was made and it's very tough to catch up once you've missed the first news cycle. i'll explain in the meeting today exactly what that abacus transaction was all about. >> susie: but tell me, given the government's fraud charges against goldman, how do you feel about being associated with the investment firm? >> i have no problem at all. i was associated with soloman when they were charged, and we got it all worked out. >> susie: are you confident enough in the company that for people who don't own the stock it's a buy at $1.45? ( laughter ) >> i don't give buy recommendations or sell recommendations, but i am not bothered by our investment-- i'll put it that way-- at all. >> susie: most people were satisfied by what they heard, including tom gayner, a big berkshire shareholder. >> in terms of goldman and businesses practices and what goes on on wall street, i think he did a very good job talking about how these are the sorts of things that have gone on for a long time on wall street. money manager tom russo was also reassured. >> berkshire's chairman is in a position of having unusually good access to information and his description of the transaction that took place was very reassuring. >> susie: but portfolio manager justin fuller was on the fence. >> i understand why he's standing by them but i still think there's a lot of probing and questions still to be asked and be examined as the government works through their process. >> susie: and what about those newbies? >> if people listened to people like him and fewer people in washington, i think we'd be way ahead. >> they aren't always out looking for the fast big bucks. i guess do what's right and do what's sensible. >> susie: and one liked what buffett said about his investment in goldman sachs. >> i think he feels very, very confident in what he purchased. he kind of used the analogy that he makes $15 every second, so he says he's sleeping and it's tick, tick, tick, and over the weekend it's tick, tick, tick. and as a shareholder i like that. >> susie: the one worry on everyone's mind here, succession. buffett turn 80 in august. for now, he says he's not ready to retire. and he shows no signs of slowing down. the day after the berkshire meeting he got a lesson in ping pong strategy from a teenage champion. he held his own. susie gharib, "nightly business report", omaha. >> tom: here's what we're watching for tomorrow. the march reports on pending home sales and factory orders. we'll also see quarterly results from c.v.s. caremark and pharmaceutical giants merck and pfizer. quarterly earnings are also brewing at molson coors. we'll look at how changing drinking habits around the world are forcing changes in the beer industry. >> suzanne: there are big bucks in checked bags for the airline industry. new government data show airlines made almost $8 billion last year from what's called ancillary fees. that's what you pay to check luggage, and buy things like food, drinks, and pillows. the biggest beneficiary: discount carrier spirit. one out of every $5 it took in last year came from extra fees, and those extras could mean more revenue in the future. in august, spirit starts charging for carry-on bags, too. >> tom: it's one of the largest legal settlements of its kind. wal-mart will pay more than $27.5 million to settle claims it illegally dumped hazardous waste such as fertilizer and paint at stores in california. the deal ends a long-running battle for wal-mart, which began when a san diego health department employee watched a worker get rid of bleach by pouring it down a drain. the company says it has improved worker training on how to handle hazardous materials. >> suzanne: work on a financial reform bill resumes in a big way tomorrow as senators are likely to begin voting on amendments regarding consumer protection and derivatives. but tonight's commentator fears new legislation won't make much here's peter morici, professor at the smith school of business at the university of maryland. >> financial reforms moving through congress wont save us from paying for another banking crisis. the federal reserve has put the kibosh on abusive mortgages. but, the proposed consumer protection agency would bend to populist sentiments for easy credit and lean on banks to create new questionable loans. so much focus is on derivatives that insure mortgage backed securities but it was those instruments, not derivatives that first instigated the crisis. before the crisis, treasury and other agencies knew about structured investment vehicles where the banks park mortgage- backed securities, but saw no danger. a systemic risk council, headed by treasury, can't make regulators clairvoyant. the goldman sachs hearings in the senate were great theater, but little in the new regulations will stop wall street from creating new weapons of mass destruction. resolution authority to breakup big failing financial firms is also a non-solution. in the recent crisis, treasury found it impossible to sell off the good pieces of citigroup and a.i.g. to quickly get back taxpayers money. but selling off good pieces is exactly what resolution authority requires. real reform would separate banks from the wall street casinos and cut the biggest banks down to size. neither republicans nor democrats have stomach for that. instead, congress rearranges the chairs on the deck of the titanic. this is peter morici. >> that is "nightly business report" monday evening may 3. i'm tom hudson. good night to you. >> good night, tom. we hope to see all of you again tomorrow night. 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