Paul Lewis/WASHINGTON DC
Continental Airlines has revealed that it wants to buy back control from Northwest Airlines, while continuing to jointly develop the pair's planned global alliance with KLM and Alitalia.
Northwest has a 14% equity stake in Continental, acquired in 1998 via a $519 million cash and stock deal with Air Partner and its affiliates, but it controls more than 51% of Continental's voting stock.
Houston-based Continental is flush with cash. It has spent $799 million re-buying B shares as part of a $1.2 billion buy-back programme announced last year and its 1999 profit of $359 million means it has enjoyed five years in the black. Northwest paid $59.66 per share for its holding, but Continental's stock now trades at $38.
Continental says it has approached Northwest "to remove uncertainty in the minds of Continental staff about the future of the airline." It adds: "We now have the resources to go forward with this kind of transaction." There is, however, no indication that Minneapolis-based Northwest is prepared to sell its holding.
Although Northwest agreed not to exert its voting rights, the 1998 deal was deemed anti-competitive by the US Department of Justice, and legal action is pending.
Continental chairman and chief executive Gordon Bethune claims any buy-back "would be designed to preserve and strengthen the benefits of the alliance" with Northwest. They have moved forward with plans for the "Wings" alliance, with Continental announcing plans last month for co-operation with KLM, and Northwest finalising its deal with Alitalia.
Northwest, meanwhile, is seeking anti-trust immunity for a tie-up with Malaysia Airlines. The pair aim to begin codesharing from 21 June between Los Angeles and Kuala Lumpur, later adding onward routes, and have combined frequent flier plans and computer reservation systems.
Source: Flight International
