SAN FRANCISCO (CN) – A merger between Continental and United Airlines does not substantially harm airline passengers, a federal judge ruled in denying a class’ bid to block the deal.
The decision came after a two-day hearing earlier this month, where U.S. District Judge Richard Seeborg heard testimony from Continental CEO Jeffrey Smisek and United CEO Glenn Tilton.
Forty-nine consumers sued in June, claiming the merger creating the largest airline in the world would crush competition and result in higher fares and reduced routes. Under questioning from class attorney Joseph Alioto, Smisek argued that without the merger, Continental would no longer be able to compete in the airline industry.
Seeborg found it unnecessary to address this argument, writing, “suffice it to say that defendants presented evidence that delaying the merger would result, among other things, in the loss of significant revenue synergies and cost savings … in threatened job security for tens of thousands of employees who will benefit from a more stable employer, and in the continued deferral of capital and technology investments.”
The merger also would not significantly affect the passengers’ lives, Seeborg concluded, since “None of the plaintiffs testified to having flown regularly and only one stated that when she does fly she is likely to use United or Continental,” the judge wrote.
“While each plaintiff provided an affidavit stating an unformed hope of future air travel, this speculative injury is insufficient to establish irreparable harm or tip the scale in plaintiffs’ favor. Although plaintiffs allege, in their briefing, that this merger will adversely effect consumer choice and purchasing power by resulting in increased airfares, decreased capacity, poorer service and a constraint on the ability of other network carriers to compete, they still must establish that these alleged effects will be personal to them. They have not done so.”
Alioto was not available for an interview but said in a voice message that he was disappointed in Seeborg’s ruling, which he said went against U.S. Supreme Court precedent.
“The court decided not to follow the Supreme Court decisions in the 1960s and 70s against these mergers, and that is very disappointing,” he said. “I think that if the Supreme Court is going to change its views and overrule its prior decisions, I think the only court to do that is the Supreme Court itself.
“Those decisions were very tough against mergers and in this case where you have the largest airline in the world there is no doubt that under those prior decisions that merger would never be allowed.”