UPDATE 4-UAL wins US antitrust approval to buy Continental

* Allows creation of world’s largest airline

* Merging carriers give Southwest 36 slots in Newark hub

* Justice Dept: Transfer to Southwest removes key concern
(Adds analysts’ comment, timeline for merger approval)

By Deepa Seetharaman

NEW YORK, Aug 27 (BestGrowthStock) – United Airlines won U.S.
antitrust approval to buy Continental Airlines (CAL.N: ) on
Friday, throwing a sweetener to rival Southwest Airlines
(LUV.N: ) to allow the creation of the world’s largest carrier.

United and Continental struck a deal to give Southwest some
take-off and landing rights at a key airport hub, Newark
Liberty International Airport near New York City, to get the
go-ahead from the U.S. Justice Department — a decision that
came sooner than industry insiders had expected.

Despite the swift antitrust review, integrating the
carriers is much more complex and time-consuming, and consumers
are not likely to see any major changes immediately.

Continental and UAL scheduled special stockholder meetings
on Sept. 17 for approval of the merger and expect the deal to
close by Oct. 1. The deal won clearance from the European
Commission in July.

United parent UAL Corp (UAUA.O: ) had announced in May that
it would buy Continental for $3.17 billion in an all-stock
deal. The combined carrier would be known as United Airlines
and be based in Chicago, with Continental Chief Executive Jeff
Smisek as CEO.

The deal is the first major U.S. airline merger since Delta
Air Lines (DAL.N: ) acquired Northwest Airlines in 2008 and comes
after the airline industry has been hammered by a surge in oil
prices followed by a deep recession.

The combined carrier would attract more business traffic
because the company would fly to 370 destinations, the airlines
have said. The merger is expected to produce between $1 billion
to $1.2 billion in annual revenue and cost benefits by 2013.

The Justice Department’s decision came less than two hours
after the two merging airlines announced they would give up 36
slots at Newark Liberty to Southwest.

The low-cost airline will have the right to operate up to
18 arrivals and 18 departures a day at the New Jersey airport.
Some of the flights will start in March 2011 and a full
schedule is expected by June 2011.

Experts had expected the airlines would have to offer some
concessions to antitrust enforcers. The Justice Department said
the transfer of slots to Southwest resolved principal
competition concerns.

“I guess 18 slot pairs was enough to get the deal done,
which was a remarkably small price,” said airline consultant
Robert Mann at RW Mann & Co.

“This keeps them on track to move at least as rapidly if
not more rapidly than they anticipated toward close,” Mann
said.

A BOOST FOR SOUTHWEST

The transfer of slots to Southwest will expand its presence
in the increasingly competitive New York market, where AMR
Corp’s (AMR.N: ) American Airlines and US Airways (LCC.N: ) also
have a presence.

Southwest already operates some flights out of New York’s
LaGuardia Airport and Long Island Islip Macarthur Airport.

Finalizing the deal puts new pressure on American Airlines
to possibly do a deal of its own or to at least drive down its
labor and other costs. American is a former No. 1 that would be
in third place once the United and Continental deal is closed.

Southwest has said it was looking to lure more business
travelers and eyeing international routes. [ID:nN29174195]

“Southwest has been trying in a variety of different ways
to get more access to both New York and Washington,” said Bob
McAdoo, a research analyst with Avondale Partners. “This gives
them meaningful access to the New York area through Newark.”

Continental and United currently operate 442 daily flights
in and out of Newark’s airport.

Houston-based Continental has 50.6 percent of the market
share at Newark, according to traffic data culled by the Bureau
of Transportation Statistics from June 2009 to May 2010.

Market share is based on the number of arriving as well as
departing passengers.
(Additional reporting by Kyle Peterson in Chicago, Karen
Jacobs in Atlanta and Jeremy Pelofsky and John Crawley in
Washington DC; Editing by Gunna Dickson, Richard Chang, Gary
Hill)

UPDATE 4-UAL wins US antitrust approval to buy Continental