Northwest Airlines has completed its $311 million purchase of 51% of Continental Airlines' voting stock owned by David Bonderman's Air Partners investment house, despite anti-trust objections from the US Justice Department.
The transaction will lead to a so-called "virtual merger" of the airlines, linking route networks through codesharing and merger of frequent-flier programmes. The US carriers would, however, maintain separate identities, fleets, management and workforces.
The US Department of Justice said in a law suit that the deal is anti-competitive. A courtroom showdown over the acquisition looms, but the Justice Department has not yet asked a federal district court to block the stock sale, although it is expected to try and force a stock sale and break-up of the alliance between Northwest and Continental, the nation's fourth and fifth largest air carriers, respectively.
The stock was placed in a voting trust to guarantee Continental's independence. Northwest has agreed to vote the stock as directed by Continental's management, except on matters involving future merger proposals. Meanwhile, Continental has created a shareholder rights plan to prevent an unwanted take-over.
The original announcement of the tie-up led to Northwest's main competitors seeking alliances of their own. United and Delta and American Airlines and US Airways proposed greater marketing co-operation, but problems with government approval and, in the case of Delta and United, a dispute with pilots, have hampered progress.
Source: Flight International
