United-Continental Merger: World's Biggest Airline Cleared for Takeoff

A merger between United Airlines and Continental Airlines is closer to the runway after the Justice Department cleared it for takeoff.United and Continental airlines moved a big step closer to their proposed combination on Friday, with the Justice Department saying it has no more antitrust concerns about the deal.

On Friday, the two airlines said they would lease takeoff and landing slots in Newark to Southwest Airlines (LUV). The Justice Department says that clears up its main competitive concern.

Shareholders at Continental Airlines (CAL) and United parent UAL (UAUA) are set to vote on the deal on Sept. 17. The combination would create the world's biggest airline.

The Justice Department says the two airlines overlap on a limited number of routes. The biggest overlap was at Newark (N.J.) Liberty International Airport.

Fewer Slots at Newark

Continental and United operate 442 daily roundtrip flights in and out of Newark. Under the deal announced Friday, Southwest would get enough slots from Continental to operate up to 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.

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'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 said it was still deciding what cities it would serve from Newark. From LaGuardia, it flies only to Chicago and Baltimore.

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August 28 2010 at 10:27 AM Report abuse +1 rate up rate down Reply