Thursday, April 15, 2010

Continental Joins Merger Talks

Just a week after it was reported that US Airways and United Airlines are in the midst of merger talks comes today’s news that Continental has entered into its own negotiations with United. SeeAndrew Ross Sorkin, Continental Reopens Talks with United, N.Y. Times, Apr. 15, 2010 (available here).

Continental and United, which had been in merger talks in 2008, have since entered into a codeshare partnership on domestic routes while enjoying antitrust immunity to cooperate on international scheduling, pricing, and revenue sharing as part of the Star Alliance. With less overlap between their respective hubs and route networks than United/US Airways, a Continental/United link-up would arguably be more beneficial to consumers. It may raise less competition concerns with the Justice Department’s Antitrust Division. United and US Airways were blocked from merging by the DOJ in 1995 and 2000, though some analysts have pointed out that changes in the air transport commercial environment since 9/11--including a decrease in both carriers’ market share--might lead regulators to take a more lenient approach to the deal.

Despite the complementary nature of their networks, Continental and United could still face tough resistance from the DOJ. A merger would make them one of the largest airlines in the world. As discussed previously on the blog, see here, the DOJ has promised “vigorous antitrust enforcement,” a statement which has been taken by some to mean that the Department intends to target any market concentration without regard to the efficiencies consolidation could lead to. If that’s true, the two airlines could be in for a long fight before their deal is consummated.

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