DOT grants antitrust immunity to Continental

DALLAS — The Transportation Department on Friday granted Continental Airlines Inc. immunity from antitrust laws, allowing it to work closely with a group of other carriers, including United Airlines, on international service.

The decision pushed aside some objections raised by the Justice Department, which said the airlines’ cooperation on pricing and services would lead to higher fares and less competition.

With the decision, Continental can join the Star Alliance of airlines, which is already shielded from U.S. antitrust laws. The Transportation Department also approved a joint venture between Continental and Star members United, Lufthansa and Air Canada for trans-Atlantic service.

But in a nod to the Justice Department’s objections, the Transportation Department ruled that the immunity won’t apply to several international routes where Continental and its new partners offer overlapping service.

Those include four routes between New York and European cities, four between the U.S. and Canada and all flights between the U.S. and Beijing. Continental and the other Star Alliance airlines will be able to serve those markets but won’t be allowed to work together on pricing and schedules.

The antitrust immunity does not let Continental and United work together on setting prices or schedules within the United States.

Antitrust immunity lets airlines work together as if they were a single carrier. Continental argued it needed antitrust immunity to compete with another group of carriers called SkyTeam, which includes Delta Air Lines Inc. and Air France-KLM, that already had immunity.

Continental Chairman and CEO Larry Kellner said the decision would increase competition by helping expand open-skies treaties that let U.S. and foreign carriers serve each other’s markets.

United Chairman and CEO Glenn Tilton said it would foster “a competitive partnership” that would help consumers and airline employees.

Transportation Secretary Ray LaHood echoed the CEOs’ comments, saying the decision would “benefit consumers, enhance competition, and preserve jobs in the airline industry.” LaHood had supported airlines seeking antitrust protection while he was a member of Congress from Illinois.

The department had given its tentative approval to Continental’s request in April. But last month, the Justice Department objected to the deal, saying it could hurt competition on U.S.-China routes and raise fares within the U.S.

The Justice Department said Continental and United were already planning to sell seats on each other’s U.S. flights, combine customer lounges, consolidate operations at airports served by both, and work together on procurement. The Justice Department said such an arrangement could closely resemble a merger of Chicago-based United, the No. 3 U.S. carrier, and Houston-based Continental, the fourth-largest, and lead to higher fares.

Continental plans to switch from SkyTeam to the Star Alliance in October. Continental expects to play a stronger role in service to Latin America and elsewhere as part of Star instead of competing within its own team by sharing many overlapping routes with Delta. Continental didn’t have antitrust immunity in SkyTeam.

The antitrust immunity for Continental will extend to its cooperation with other Star Alliance members Austrian Airlines, bmi, LOT Polish Airlines, Scandinavian Airlines, Swiss and TAP Air Portugal.

Friday’s decision could also boost AMR Corp.’s American Airlines, which is seeking antitrust immunity to work with British Airways and Spain’s Iberia on trans-Atlantic service.

Shares of Continental rose 61 cents, or 6.5 percent, to close at $10; United parent UAL Corp. gained 8 cents, or 2.5 percent, to finish at $3.26; and AMR added 19 cents, or 4.8 percent, to end at $4.17.