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Air Canada and United slip, Continental and Delta gain amid alliance wobbles and liquidity crunch


In a filing with the US Department of Transportation, the Department of Justice has vehemently opposed the granting of blanket antitrust immunity to Continental Airlines and nine members of the Star Alliance, preferring more limited cooperation. The DoJ is particularly concerned with proposed closer ties between United Airlines and Continental Airlines in the domestic market.

The DoJ stated, "Continental and United hope eventually to codeshare on nearly all of their domestic flight segments, combine customer lounges, consolidate their operations at common airports, provide frequent flyer reciprocity, cooperate on ticketing, reservations and check-in and perform joint procurement”.

It will be interesting to see how the DoT and the airlines react to the DoJ’s submission. Some revisions to the immunity applications are probable, to accommodate the DoJ’s concerns.

Continental had sought antitrust immunity by the end of May-2009, as part of its timeframe to leave SkyTeam on 24-Oct-2009, joining the Star Alliance shortly after. American Airlines, whose shares were steady yesterday, is also seeking antitrust immunity with British Airways, whose shares closed 1.4% lower in London yesterday.

Continental’s stock closed up 0.9% yesterday, while Delta advanced 1.6% and United Airlines eased 0.3%.

Liquidity crunch

United has meanwhile disclosed it sold USD175 million in senior notes on Friday backed by its US aircraft spare parts, to boost its liquidity amid the downturn. American Airlines’ parent AMR announced it would sell USD520.1 million in ten-year notes yesterday.

Air Canada’s B shares fell 2.1% as the airline concluded a CAD100 million revolving loan agreement with Aeroplan. The loan replaces a Nov-2008 prepayment arrangement for air travel rewards purchased from Air Canada. Cash poor Air Canada has already made an initial draw-down under the loan of CAD79 million.

North & South America selected airlines daily share price movements (% change): 29-Jun-09

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