Continental, United plan global cooperation

By Mark McSherry

NEW YORK (Reuters) - Continental Airlines Inc (CAL.N) and UAL Corp's (UAUA.O) United Airlines on Thursday announced a global cooperation plan, the latest move in the dance between major U.S. carriers as they weigh mergers and alliances to help combat soaring fuel prices.

Continental, which called off merger talks with United in April, according to sources briefed on the matter, also plans to join United in the Star Alliance system, a significant defection which redraws the battle lines between the major airline groups.

The U.S. No. 4 airline will request that the U.S. Department of Transportation allow it to join United -- along with Germany's Lufthansa (LHAG.DE), Air Canada (ACa.TO) and six other carriers -- in their established antitrust immunized alliance.

Continental said it intends to terminate agreements with its current SkyTeam members, which include Air France-KLM (AIRF.PA), Delta Air Lines (DAL.N) and Northwest Airlines NWA.N.

Such a move by Continental, which was also considering joining British Airways (BAY.L) and AMR Corp's American Airlines in their oneworld alliance, was expected after SkyTeam members Delta and Northwest announced a plan to merge earlier this year.

"Alliances are critical for airlines and I think Continental had viewed the Northwest-Delta tie up as too much of an influence in the SkyTeam," said Brian Nelson, an analyst at Morningstar.

"Continental wanted to neutralize the situation and move to a solid team -- but I think the catalyst behind this was the Delta-Northwest merger."

Continental will now look to obtain approvals to enter Star Alliance, which includes Singapore Airlines (SIAL.SI), Japan's All Nippon Airways (9202.T) and US Airways (LCC.N), among others.