DETROIT - Continental Airlines and Northwest Airlines have reached a tentative deal in which Northwest will sharply reduce its controlling stake in Continental in an effort to settle a federal antitrust lawsuit.
The two airlines said Monday they planned to ask U.S. District Judge Denise Page Hood to delay an antitrust trial for a week to let the companies reach definitive agreements.
The Justice Department has been pressing Northwest to give up its 55 percent voting stake in Continental, arguing that Northwest's holding could squeeze consumers, worsen service and stifle competition. However, its shares represent only 14.8 percent of Continental's equity.
Under the proposal, Northwest will exchange its Class A Continental shares, carrying 10 votes each, for $450 million in cash and a lesser number of Continental B shares that carry one vote per share.
Northwest also would get preferred stock that would give it the right to veto a proposed combination between Continental and other carriers under some conditions.
Continental spokesman Ned Walker said Northwest also abandoned what last week was a stumbling block to talks: its insistence that Continental pay $2 billion if it breached the alliance, though no such penalty applied to Northwest if it did the same.
The transaction would depend on the withdrawal of the government's antitrust lawsuit against both companies over Northwest's 1998 purchase of the controlling stake in Houston-based Continental.
The antitrust trial got under way last week. Acting U.S. Attorney General A. Douglas Melamed, who heads the Justice Department's antitrust unit, said the government would join the airlines in asking Hood to defer the trial's resumption until Nov. 14.
Melamed issued a statement calling the agreement ''a victory for consumers, who will benefit from lower fares and better airline service.''
The proposed deal would extend until 2025 the carriers' domestic alliance, which both say helps them better compete with the nation's top three carriers - United, American and Delta.
Northwest, based in Eagan, Minn., is the nation's fourth-largest carrier, Continental the fifth.
Northwest and Continental run separately but have linked their route systems, share codes that let one carrier book seats on the other's flights, and have reciprocal frequent-flier programs.
The government has not tried to overturn the carriers' alliance.
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On the Net:
Northwest: http://www.nwa.com
Continental: http://www.continental.com
Justice Department: http://www.usdoj.gov