(CAL - Get Report)
said the Justice Department has approved their planned merger and they expect it to close Oct. 1.
Approval came less than four months after the pair
announced on their intention
to merge into the world's largest airline on May 3.
A deal to give low-fare carrier
(LUV - Get Report)
access to Newark Airport appeared to be a key step in securing Justice Department approval for the merger.
Late Friday afternoon, in quick succession, the merger partners announced the Southwest deal and then, about two hours later, said the Justice Department had completed its Hart-Scott-Rodino Act review and closed its investigation of their pending merger.
The next step is shareholders' votes in September, "following which we expect to be on track to close our merger by October 1st," said United CEO Glenn Tilton, in a prepared statement.
Added Continental CEO Jeff Smisek: "The DOJ's decision permits us to clear one of the last regulatory hurdles to closing our merger." State attorneys general continue to review the deal. The European Commission cleared the combination in July.
Continental agreed to lease 36 slots at Newark to Southwest. This would enable the carrier to operate 18 daily round-trip flights. Southwest said it could begin Newark service in March and provide a full schedule by June. The lease deal is contingent upon the closing of the merger by Nov. 30. Southwest did not say what destinations it would serve. From LaGuardia, where it began flying in June 2009, it offers eight daily non-stops to two cities, Baltimore and Chicago.
"We've seen tremendous demand for Southwest Airlines in the New York City/Newark area in the past year," said Bob Jordan, executive vice president of strategy and planning, in a prepared statement. "Adding Newark provides an excellent complement to our LaGuardia and Long Island service (and) will provide a needed injection of low fares and competition into the New York/Newark market."
In a joint press release, Continental and United said the agreement "is intended to address United States Department of Justice concerns" related to the merger.
Continental and United currently operate 442 daily roundtrip flights into and out of Newark Liberty, which had the country's fifth-highest fares in the first quarter of 2010, according to the Bureau of Transportation Statistics. Although it was once the home of People Express, Newark has more recently become a high-fare airport, not atypical when a single airline operates a dominant hub.
During the quarter, domestic round-trip fares from Newark averaged $423, the BTS said. Kennedy Airport had the 37th highest average fare, $344, while LaGuardia ranked 55th at $318.
At Kennedy, the largest domestic carrier is
, also a low-cost, low-fare carrier.
LaGuardia, meanwhile, has low fares because it competes with Kennedy and has a wide variety of carriers including
, the third of the nation's three low-fare carriers, which flies non-stop to Atlanta and Akron, Ohio.
-- Written by Ted Reed in Charlotte, N.C.
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