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Cleared for takeoff: Justice Department approves United-Continental merger
In a surprise announcement, the Department of Justice signed off on the merger of United and Continental airlines late Friday afternoon after only a four-month review.
Officials are hopeful the merger can be completed by early October. Shareholders of both companies vote on the proposal on Sept. 17.
The merger announcement came soon after officials at Continental and United agreed to lease 18 landing and take-off slots at Newark Liberty International Airport to archrival Southwest Airlines. The gesture allayed Justice Department concerns about the merged airline's dominance in the lucrative New York market.
In a statement posted on its website, the government agency announced it had closed its investigation into the proposed United-Continental merger as a result of the Southwest deal.
The proposed merger would combine the airlines’ largely complementary networks, which would result in overlap on a limited number of routes where United and Continental offer competing nonstop service. The largest such routes are between United’s hub airports and Continental’s hub at Newark airport, where Continental has a high share of service and where there is limited availability of slots, making entry by other airlines particularly difficult. The transfer of slots and other assets at Newark to Southwest, a low cost carrier that currently has only limited service in the New York metropolitan area and no Newark service, resolves the department’s principal competition concerns and will likely significantly benefit consumers on overlap routes as well as on many other routes."
Continental and United currently operate 442 daily round trip flights at Newark, Continental’s second-largest hub after Houston. Continental controls more than 60 percent of traffic at the airport, according to the Bureau of Transportation Statistics.
The deal with Southwest is contingent on the United-Continental merger closing by Nov. 30.
“We are pleased to have achieved this critical milestone and look forward to our respective stockholders’ votes next month, following which we expect to be on track to close our merger by October 1st,” Glenn Tilton, UAL Corporation chairman, president and CEO, said in a prepared statement. “The combination of United and Continental will create a world class airline, which will deliver an industry leading network for our customers and the communities we serve, career opportunities for our people, and value and return for our stockholders.”
“The completion of DOJ’s review is an important step on our journey of creating the world’s leading airline, benefiting our customers, co-workers, communities and stockholders,” Jeff Smisek, Continental’s chairman, president and CEO, added. “The DOJ’s decision permits us to clear one of the last regulatory hurdles to closing our merger.”
Smisek will head the new airline, which will be named United, once the deal is final.
The New York Times reports that even if the merger goes through according to schedule, the new entity will continue to operate as separate airlines for another year until the Federal Aviation Administration issues a single operating certificate.
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Photo by Leonid Furmansky