Continental, United airlines merger can proceed, judge says

CLEVELAND, Ohio -- A federal judge in California has struck down a claim that the merger of United Airlines and Continental airlines will create a monopoly.

U.S. District Judge Richard Seeborg said plaintiffs who sued to stop the merger failed to establish that it should be blocked on antitrust grounds because it would hurt consumers. In a written order Monday, Seeborg denied a motion for a preliminary injunction to halt the deal.

United and Continental expect to close their $3.2 billion all-stock merger Friday.

The judge noted that none of the 49 plaintiffs -- travel agents and others with connections to the travel industry -- testified about any specific impact the merger would have on their clients.

Seeborg's ruling also said the plaintiffs had not shown that they personally would be harmed by the merger. None of them testified to having flown regularly, and only one said that she is likely to use United or Continental when she does fly, Seeborg wrote.

"We are gratified by the court's decision to deny the plaintiff's motion," said Continental spokeswoman Julie King.

The plaintiffs claimed that the merger would result in higher ticket prices, elimination or curtailment of air service in some cities, job losses, deteriorating customer service and substantial cutback of traffic to hubs.

The plaintiffs' attorney, San Francisco antitrust specialist Joseph Alioto, could not be reached Tuesday.

In earlier comments to The Plain Dealer, Alioto said he thinks Continental revised plans for deep cuts at Cleveland Hopkins International Airport after he introduced an internal Continental document in court suggesting they might occur. The document said that the merged airline might lower domestic departures from Hopkins by 84 percent, from 210 to 33 a day.

"I can assure you that had that not come out, Cleveland would have been the first to be cut," Alioto said.

Continental declined comment on Alioto's remarks. But in a statement earlier this month the airline said that the "hub stats" document that Alioto introduced was just one of several merger scenarios it modeled and that it represented a worst-case scenario.

In May, Ohio Attorney General Richard Cordray launched a separate investigation into the merger's impact on the state and nation, but particularly Cleveland.

Cordray and executives of Continental and United settled the investigation with an agreement announced Sept. 13 on the merged airline's Hopkins activity. It binds the new United to maintaining departures out of Hopkins at no less than 90 percent of United and Continental's combined departures today. What happens in the final three years of the five-year pact hinges on Cleveland's profitability for the new United.

After the announcement Monday that Southwest Airlines plans to buy AirTran Airlines, Alioto asked Seeborg to consider what he called "undeniable evidence" that the United-Continental merger will lead to further industry consolidation.

"It is now even more difficult to imagine that U.S. Airways will seek to remain independent and not attempt to merge with American Airlines," he wrote.

Southwest, the busiest domestic carrier in the U.S., plans to buy AirTran in a $1.4 billion deal. Analysts said the combination of the two low-cost carriers could ramp up pressure on established major carriers, and also lead to higher fares in some markets.