The agreement between United and Continental focuses on significant cooperation on frequent flier programs, lounges, facility utilization, information and procurement. Those areas of cooperation can be accomplished without antitrust immunization. But coordination of flight schedules and fares cannot. So Continental plans to seek permission from the US Department of Transportation to share the antitrust immunization it recently granted to other members of Star Alliance.
The resulting trans-Atlantic joint venture would allow Continental, United, Lufthansa and Air Canada to pool revenue and compete more effectively in the global aviation market. Downstream plans include similar joint ventures for Star's Latin American and Asia/Pacific regions.
In the US domestic market, the two airlines can quickly begin broad code-sharing. Their respective route networks are considered to be highly complimentary with little overlap. (Continental had announced extensive capacity cuts, especially in Cleveland and Houston, just a few days before announcing the deal with United. More information about these and other cuts in the domestic market is available on page 24.) It may also give them new strength in markets like Denver, where the two airlines are facing aggressive competition from Southwest.
In the international arena, the changes will come more slowly. Both codesharing and antitrust immunity are subject to approval from the various nations with authority over the airlines involved. Continental's shift to Star must also navigate past contractual relationships with various SkyTeam members. The joint announcement from United and Continental notes, for example, that one contract will not terminate until six months after the closing of the proposed Delta/Northwest merger.
