Feds may OK Continental-United alliance after Delta merger

Continental Airlines Inc., seeking new alliance partners after the record merger of two competitors, may get U.S. regulatory approval soon to join a group of carriers led by UAL Corp.'s United Airlines.

A favorable decision by the U.S. Transportation Department would help Continental, United and members of the Star Alliance compete with Delta Air Lines Inc., which became the world's largest carrier by buying Northwest Airlines Corp. this week.

``Continental's application is a natural extension of the rolling moves among the competing groups,'' Ray Neidl, an analyst at Calyon Securities in New York, said yesterday in an interview. ``It should be logical for Continental to get approval.'' He rates Continental as ``add.''

Continental applied with the Transportation Department in July to be part of the Star Alliance with Chicago-based United after being excluded from an antitrust-immunity request for Delta, Northwest, Air France and KLM, its current partners in the SkyTeam alliance.

The agency probably will decide on Houston-based Continental before a new president takes office in January, Neidl said. United and Continental, the third- and fourth- biggest U.S. airlines, respectively, have said they could extend their global reach by putting customers on each other's planes.

U.S. approval of the Delta-Northwest combination shows regulators are willing to let carriers forge tighter ties to compete worldwide, said Andrew Steinberg, a former assistant transportation secretary under President George W. Bush who is now a partner at the Jones Day law firm in Washington.

``We are clearly in a global market now in which the name of the game is network competition,'' Steinberg said. ``I personally don't believe the trend toward liberalization can or should be stopped.''

Delta's purchase of Northwest won't hurt competition, and consumers are ``likely to benefit from improved service,'' the U.S. Justice Department said on Oct. 29. The new Delta will fly to most major cities in Europe, Latin America and Asia.