United-Continental to keep Cleveland operations

By Julie Johnsson
Posted Sep. 13, 2010 at 4:47 p.m.

United and Continental Airlines agreed on Monday to maintain a hub in Cleveland for at least five more years, as Ohio Attorney General Richard Cordray ended his antitrust investigation of the mega-merger.

The announcement clears one of the last remaining roadblocks to the tie-up, which will create the world’s largest carrier. The Justice Department, which had been expected to provide the closest scrutiny of the deal, concluded its antitrust probe last month.

United and Continental shareholders will vote on Friday to formally approve the financial union of the two airlines. The deal is slated to close on Oct. 1, when Continental CEO Jeff Smisek will become chief executive of the new United.

The merged airline’s commitment to Cleveland had been a source of angst to city and state leaders and had fueled Cordray’s probe of the deal’s potential impact on air service and jobs in Ohio.

United and Continental agreed to maintain specified levels of service and jobs at Cleveland Hopkins International Airport and to allow the Ohio Attorney General’s office to audit their records to ensure that the agreement is upheld.

If the new United reneges on its part of the bargain, it faces a $20 million fine and a lawsuit.

Analysts had predicted that the new United would gut its Cleveland operations, currently the smallest of Continental’s three U.S. hubs, in favor of increased flying at Chicago’s O’Hare International Airport.

That conclusion appeared to be bolstered by a pre-merger analysis conducted by Continental that contemplated a huge reduction in service for Cleveland. The documents were made public earlier this month during a federal court hearing examining a request for a preliminary injunction filed by current and retired travel agents want to block the merger.

Continental later said the report in question was one of several simulations conducted by the airline and “modeled the most severe recession or disaster scenario.”


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