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Continental enters United alliance, spurns American Airlines

Continental Airlines announced Thursday it will enter into a broad partnership with United Airlines and the Star Alliance airline group, a deal that, while falling short of a full merger, will align Continental with a large network of international carriers.

In choosing to partner with United, Continental effectively spurned American Airlines and British Airways, who had been holding talks with Continental in recent months about a similar arrangement to join their Oneworld airline alliance.

Larry Kellner, chief executive of Houston-based Continental, said the United deal would link the airlines’ networks, create opportunities to boost revenues and cut costs. Continental will also join the Star Alliance airline group, which includes Lufthansa, Air Canada, Air China and other international carriers as well as United and U.S. Airways.

“The teams worked well together to identify opportunities to create a unique and competitive partnership extending well beyond a traditional code share agreement,” said Glenn Tilton, United’s chief executive, in a statement. “Our two companies will work together effectively with our partners to provide the best overall network in America and the world.”

Continental and United had considered a traditional merger earlier this year, but in April, Continental officials rejected the idea and said they would prefer to remain independent.

American said in May that it was negotiating a possible hookup with Continental, along with British Airways, a deal that also would have likely included Continental joining the Oneworld alliance, which includes American and British Airways.

The three carriers would also likely have applied jointly for an anti-trust exemption to cooperate on flights across the Atlantic.

Officials with American declined to directly address Continental's decision.

"We're continuing our talks with British Airways about furthering our relationship," said spokesman Tim Wagner.

American and British Airways have tried to negotiate antitrust in the past, but were told they would have to give up some of their slots at London’s Heathrow Airport. Regulators argued that the airlines have an unfair advantage at Heathrow, because they were two of just four airlines allowed to fly from the United States to the airport, which is Europe’s busiest.

But a new aviation treaty between the United States and the European Union makes Heathrow available for more service.

Airline consultant Darryl Jenkins said Continental's move to join Star, which already has an anti-trust deal among its members, puts pressure on American and British Airways to file for their own exemption to cooperate on flights across the Atlantic.

"There's no reason to hold back at this point," he said. "This actually makes it the perfect time to apply for anti-trust."

Delta Air Lines and Northwest Airlines, which have plans to merge, also have an anti-trust agreement, via their SkyTeam alliance.

"You have a large merger out there, and now you have a super-sized (partnership), there's really no reason to continue excluding American," Jenkins said.

Continental had previously been a member of the SkyTeam alliance, which also includes Air France, KLM, Alitalia and others.

Trebor Banstetter, (817) 390-7064

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