Continental Joins United in Star Alliance

HOUSTON (TheStreet) -- Continental Airlines (CAL Quote) plans Tuesday to join UAL's(UAUA Quote) United Airlines and 23 other airlines in the Star Alliance, increasing the chances the two big U.S. carriers could consider a merger down the road, the Wall Street Journal reports.

Continental walked away 18 months ago from merger talks with United, which would have created the world's biggest air carrier.

Continental's switch from the rival SkyTeam alliance marks the biggest defection among airline alliances since carriers began teaming up to share flights, frequent-flier programs and airport lounges, the Journal notes.

Continental's move pits it against Delta Air Lines(DAL Quote), a former Skyteam partner and world's biggest airline. Delta competes with Continental in many markets, including New York and Latin America, where Star has had little presence until now. Continental's alliance with United will bolster is offerings on routes in the West and on trans-Pacific routes, the Journal notes.

"You want an alliance with someone who is not a competitor," said Continental President Jeff Smisek, in an interview with the newspaper.

Continental estimates its partnership with Star will generate $100 million in added revenue annually. Continental won't disclose the transition costs but says the alliance will boost its bottom line by 2011, the Journal reports.