Northwest Airlines' plans to take a controlling shareholding in Continental Airlines could be thrown into jeopardy because of concerns by the US Department of Justice (DoJ) over the proposed link-up.
The two airlines confirm that they are negotiating with the DoJ to resolve unspecified differences over Northwest's plan to acquire a controlling stake in Continental from investment group Air Partners LP, and form a strategic alliance. The DoJ may go to court to block the alliance if a compromise is not reached.
"At this point, we can't predict whether the DoJ's concerns will be addressed by an agreement or by litigation. If there is litigation, we expect the implementation of our global alliance with Northwest will be delayed," says Continental.
Northwest has reported a third-quarter loss of $224 million, largely because of a two-week strike by pilots that cost the USA's fourth-largest airline $630 million. It says the loss also reflected continued traffic weakness in Asia, where the US air carrier derived a quarter of its revenues last year. Northwest also predicts a net loss for the fourth financial period and for the year. The $224 million net loss compares to a profit of $290 million in the 1997 third quarter.
Continental saw its earnings drop 34%, to $73 million, because of a special $77 million charge for early aircraft retirements.
In the July-September period 12 months ago, Continental earned $114 million.
Source: Flight International
