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United, Continental Sued in Bid to Block Merger

June 29 (Bloomberg) -- UAL Corp.’s United Airlines and Continental Airlines Inc. were sued over claims the companies’ proposed merger would create a monopoly, increasing fares and costing jobs.

The complaint was filed today in federal court in San Francisco by Joseph Alioto, a lawyer who said he’s representing U.S. consumers and small businesses. Alioto is seeking to block the merger.

“We believe in competition, not combination,” Alioto said in an interview. “The trend in this particular industry is heading straight for monopoly.”

The merger will increase fares, reduce the number of flights, diminish services such as meals and eliminate tens of thousands of jobs, according to the complaint. The proposed merger “substantially restrains” the competition between the carriers for passenger service throughout the U.S. at the expense of consumers, Alioto wrote.

United and Continental are seeking regulatory approval to combine under an all-stock merger they announced May 3. The new company would surpass Delta as the world’s biggest airline and mesh United’s Pacific routes with Continental’s service in Latin America and over the Atlantic.

‘Best Interests’

“We believe this suit has no merit, and we will vigorously defend what we strongly believe to be a transaction that is in the best interests of Continental, its shareholders and the flying public,” Julie King, a spokeswoman for Continental, said in an e-mailed statement.

Jean Medina, a United spokeswoman, also said the complaint has no merit.

United is “cooperating with the Department of Justice as they thoroughly review our merger, which will benefit customers with the most comprehensive route network, connecting people across the world and the US, including 148 small communities,” she said in an e-mailed statement.

United and Continental, which reported $29 billion in combined revenue last year, have about 700 jets in their main fleets and employ 88,000 workers. The combined company would keep United’s name and Chicago headquarters. The carriers have said they will generate as much as $1.2 billion through cost savings and revenue growth.

The case is Malaney v. UAL Corp., 10-2858, U.S. District Court, Northern District of California (San Francisco).

To contact the reporter on this story: Joel Rosenblatt in Denver at jrosenblatt@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

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