UPDATE 2-U.S. DOT approves Continental joining alliance

* DOT approves Continental Airlines joining Star Alliance

* Antitrust immunity limited on some Canada, China routes

* Continental shares up 6.6 percent; UAL shares down (Recasts; adds CEO and analyst comments, background; updates shares)

CHICAGO, July 10 (Reuters) - The Obama administration on Friday approved a bid by Continental Airlines Inc CAL.N to join UAL Corp's UAUA.O United Airlines and other carriers in the global Star Alliance.

The final U.S. Transportation Department order, which gave the carriers limited immunity from antitrust law, permits carriers to share pricing, scheduling and other information within the alliance.

Opponents of the immunity had argued that allowing Continental into the alliance would dampen competition and harm consumers with higher fares.

UAL and Continental, however, cheered the government decision, which enables carriers to build international networks without running afoul of U.S. law that discourages mergers between domestic and overseas airlines.

“United, Continental and the Star Alliance carriers will be able to compete more effectively in an increasingly global air travel market,” UAL Chief Executive Glenn Tilton said in a statement.

“It ensures global competition with other antitrust immunized alliances while encouraging the retention and growth of open skies between the U.S. and other nations,” said Continental Chief Executive Larry Kellner in a statement.

Continental shares jumped on the news, gaining 6.6 percent to $10.01 on the New York Stock Exchange early Friday afternoon. UAL fell 0.3 percent to $3.19 on Nasdaq.

“From a network perspective, their network just got a lot bigger, and it will allow them to be more competitive with other airlines,” said Stifel Nicolaus analyst Hunter Keay.

UAL and Continental initiated the partnership last year in lieu of a discarded plan to merge the two carriers. Some experts, including UAL’s Tilton, say the airline industry desperately needs consolidation to remove excess capacity and cut costs.


The Star Alliance was created in 1997 with member airlines offering a combined 17,000 daily departures to 160 countries.

The nearly two dozen members of the Star Alliance include US Airways Group Inc LCC.N, Deutsche Lufthansa AG LHAG.DE, Air Canada ACa.TOACb.TO, Air China Ltd 601111.SS and Thai Airways International THAI.BK.

The immunity designation allows alliances to maximize revenues by operating crucial aspects of their businesses as one company, a practice normally prohibited by antitrust laws.

The order, signed by Christa Fornarotto, an acting assistant secretary at the Transportation Department, limited antitrust immunity for some U.S. routes to Canada and to Beijing, acknowledging concerns raised by antitrust officials at the U.S. Department of Justice.

“The venture, as well as the broader alliance, will create substantial new service options and fare benefits for consumers,” the Transportation Department said in the 3O-page order.

“After careful consideration of DOJ’s and other parties’ arguments, we confirm our tentative decision that this application is not anti-competitive,” the government said. (Reporting by John Crawley, Julie Vorman, Kyle Peterson and Deepa Seetharaman; Editing by Tim Dobbyn and Richard Chang)