The world’s biggest airline given the go ahead

by Ella FAIRCHILD on July 28, 2010

US carriers Continental and United have been given the green light to merge.

The partnership will result in the world’s biggest airline, after European competition enforcers cleared the proposed merger yesterday.

The European Commission decided that the coalition of the leading US airlines would not significantly hinder effective competition in the European market, where they serve a combined total of 35 destinations. The newly created airline will operate under the United Airlines brand name, and will consist of around seven percent of the world’s total airline capacity. It will have a market value of approximately USD$6.75 billion dollars (Euro 5.2 billion).

The deal still requires approval from the respective shareholders of the carriers, in addition to US anti-trust authorities. While shareholders are unlikely to refuse the history-making agreement, authorities may look to a similar case in 2001, where the turned down a proposed coalition between US Airways and United, for precedent. In defending the merger, a statement from the group highlighted the fact that Continental and United would only experience small market share increase as they operate out of different hubs in the US, with cargo traffic in particular being almost untouched.

The potential merger is the latest in a long list of partnerships between airlines that have suffered since the start of the recession, with rising fuel costs and the Icelandic volcano crisis causing widespread financial damage to carriers across the planet, leading to a scramble to join forces to survive.

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