Ticket Buyers Sue To Stop $3B Continental-United Deal
June 30, 2010 - 5:18 pm

A group of 49 individual ticket buyers who say the proposed $3 billion merger between UAL Corp.'s United Air Lines Inc. and Continental Airlines Inc. would hurt airline industry competition have filed a suit seeking to stop the deal.

Higher ticket prices and diminished service are the likely result of the merger, according to the lawsuit filed Monday in the U.S. District Court for the Northern District of California by first-named plaintiff Michael C. Malaney of Michigan and purchasers of airfares from across the U.S.
The "probable and planned" anti-competitive results of the merger would include fewer flights, fewer available seats, fewer amenities and an impetus toward further airline consolidation, according to the suit.

Malaney and his fellow plaintiffs seek an injunction blocking the merger pursuant to the Clayton Antitrust Act. Their complaint values the United-Continental deal at $8.3 billion, a combination of the $3 billion in equity that would change hands and the $5.3 billion in assumed long-term debt at Continental.

United spokeswoman Megan McCarthy said Wednesday the suit is without merit.

The merger "will benefit customers with the most comprehensive route network, connecting people across the world and the U.S., including 148 small communities," she said.

The lawsuit is just the latest potential obstacle standing in the way of the tie-up between the two major air carriers.

Last week the pilots of United and Continental, represented by the Air Line Pilots Association International, said they had run into a roadblock while negotiating a transition agreement with the airlines' management.

The parties have been unable to reach a deal on generating an integrated seniority list for pilots who will fly post-merger, the pilots' union said Friday.

"Success requires that management continue to focus on getting past these initial issues and allow us to move forward with the joint collective bargaining process," said Wendy Morse, who represents United pilots.

Earlier in June, skeptical lawmakers in the U.S. House of Representatives grilled the CEOs of Continental and UAL, expressing concern about the merger's potential to curb competition in the airline industry and its effect on employees.

And in early May the U.S. Department of Justice's Antitrust Division said it would go over the merger with a fine-tooth comb to make sure it wouldn't hurt competition.

McCarthy noted on Wednesday that the airlines are "cooperating with the Department of Justice as they thoroughly review our merger."

Continental and United serve more than 144 million passengers per year with service to 370 destinations in 59 countries. They had a combined revenue of $29 billion in 2009.
The plaintiffs are represented by the Alioto Law Firm, Gray Plant Mooty and Messina Law Firm PC.

Counsel information for the airline defendants was not immediately available.
The case is Malaney et al. v. UAL Corp. et al., case number 10-cv-02858, in the U.S. District Court for the Northern District of California.

--Additional reporting by Jacqueline Bell
To see court documents and read similar stories, visit Law360.com.