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Justice Department approves United and Continental airlines merger

The unexpectedly speedy four-month review paves the way for the carriers' proposed merger to close before Thanksgiving.

August 27, 2010|By Julie Johnsson

The Justice Department said Friday that it had approved the proposed tie-up of United and Continental airlines, after an unexpectedly speedy four-month review that paves the way for the merger to close before Thanksgiving.

To win the blessings of federal antitrust regulators, United and Continental agreed to lease slots for 18 round-trip flights to Southwest Airlines at Newark Liberty International Airport in New Jersey, giving the low-cost carrier its second foothold at a major airport servicing New York City. Southwest began flights to LaGuardia International Airport last year.

Continental and United currently operate 442 daily round-trip flights at Newark, Continental's second-largest hub. Continental and its regional affiliate control more than 60% of traffic at the airport, according to the Bureau of Transportation Statistics.

Southwest will begin flying from Newark in March 2011 and plans to operate a full schedule of flights by June 2011. The deal is contingent on the United-Continental merger closing by Nov. 30.

The arrangement resolves Justice Department qualms about the market power that the merged carrier would have held in New York. It also enables the carriers to potentially wrap up their deal without the protracted investigation that ultimately torpedoed United's effort to acquire US Airways a decade ago.

"We think this would be a fair solution that would allow Continental and United to create an airline that will provide customers with an unparalleled global network and top-quality products and services, while enhancing domestic competition at Newark," Continental Chief Executive Jeff Smisek said in a statement. Smisek would head the new airline, which would be named United and be headquartered in Chicago.

The merger must still be approved by Transportation Department officials as well as shareholders of United and Continental, who are slated to vote Sept. 17.

Antitrust regulators had been expected to pose the toughest challenge to the $8-billion merger, which would create one of the world's largest airlines. Justice Department officials had been critics of a 2009 decision by Transportation Secretary Ray LaHood to grant antitrust immunity to the carriers to set prices on North Atlantic flights with Star Alliance partners Air Canada and Lufthansa.

jjohnsson@tribune.com

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