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Justice Dept. signs off on United-Continental deal

- Associated Press - Friday, August 27, 2010

MINNEAPOLIS (AP) — The Justice Department said Friday that it has no more antitrust concerns about the deal that would combine United and Continental into the world's largest airline.

To win that approval, the airlines had to open the door to Southwest Airlines at Continental's hub in Newark, N.J., where it is the dominant carrier. The Justice Department said leasing takeoff and landing permission to Southwest in Newark cleared up its main competitive concern.

Shareholders at Continental Airlines Inc. and United parent UAL Corp. are set to vote on the deal on Sept. 17, and the Transportation Department has to approve it. The airlines now expect the deal to close by Oct. 1.

The combined airline would leapfrog Delta Air Lines Inc. to become the world's biggest airline. Delta itself grabbed the top spot by buying Northwest Airlines in 2008.

The Justice Department said it thoroughly investigated the United-Continental deal and concluded that their two networks mostly complemented each other, with overlaps on a limited number of routes.

But Newark stood out. Continental had 70.9 percent of Newark's passengers during the year that ended in June. United is only Newark's fifth-biggest airline, but most of its hubs also connect directly to Newark.

Continental and United operate 442 daily roundtrip flights in and out of Newark. The deal with Southwest will give it enough of Continental's slots to operate 18 roundtrip flights there by June 2011.

The move increases competition for Continental at its Newark hub, as well as for United. Currently, Southwest operates a few flights at New York's LaGuardia Airport but none at Newark or Kennedy.

Southwest is getting slots at both peak and off-peak travel times, Continental Chairman and CEO Jeff Smisek told workers in a memo. Smisek will be CEO of the combined airline, which is to be called United and based in United's hometown of Chicago.

Southwest's entrance to Newark won't change the estimates for revenue gains and cost savings from combining United and Continental, United Chairman and CEO Glenn Tilton told employees in a message on Friday.

"We vigorously compete with Southwest throughout our network," he said.

Mike Boyd, an airline and airport consultant in Colorado, said giving up a few slots at Newark was an easy decision for the combining giants.

"United and Continental want to get this merger done," Boyd said, and if federal regulators "stick their nose in there and say, 'Give something up,' they're going to give it up."

Bob Jordan, Southwest Airlines Co.'s executive vice president for strategy, said Newark would complement his airline's service at LaGuardia and increase competition in the New York market. Southwest, which is based in Dallas, said it was still deciding what cities it will serve from Newark. From LaGuardia, it flies only to Chicago and Baltimore.

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Koenig reported from Dallas.

 

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