Southwest Airlines Co. (LUV) said Friday it will boost its New York-area flying next year as part of a deal that also seeks to ease concerns from regulators about the proposed merger of UAL Corp.'s (UAUA) United Airlines and Continental Airlines Inc. (CAL).

Dallas-based Southwest plans to lease take-off and landing slots at Newark Liberty International Airport from Continental, adding to its existing services in the region from New York LaGuardia and Islip on Long Island.

Southwest would lease slots to operate 18 daily round-trip flights at peak and off-peak times, which analysts said would likely be enough for high-frequency service to three yet-to-be-disclosed destinations. It would start some flights in March 2011, with a full schedule by next June.

Continental and United said in a joint statement that the plan was a fair solution to concerns raised by the Department of Justice about their proposed merger. The airlines have responded to a second request for information from regulators, and had previously said they were confident of closing a deal by year end. The Southwest plan is contingent on sealing a deal by Nov. 30.

Newark is the New York area's largest hub and a stronghold of Continental, but rivals including Delta Air Lines Inc. (DAL), AMR Corp.'s (AMR) American Airlines and JetBlue Airways Corp. (JBLU) are seeking to buttress their presence in the country's largest travel market.

Southwest has a limited presence at slot-restricted LaGuardia and successfully campaigned to block a planned transfer of slots at the airport involving Delta and US Airways Group Inc. (LCC). Delta aimed to strengthen its position at LaGuardia while US Airways would have secured more access to Reagan National in Washington, D.C.

For Southwest, an enhanced New York presence fits its strategy of winning more premium business travelers. The country's largest carrier of domestic passengers is revamping its frequent-flier program to secure more high-paying corporate accounts, as well as providing in-flight wireless service and credit card tie-ins, a key revenue source for the industry.

The airline, like other low-cost carriers, had reeled in growth plans over the past 18 months but continues to add back limited capacity to balance supply with recovering demand. Southwest had previously announced plans to add two new cities next year to expand its network to 71 destinations. It will also decide in December whether to order larger versions of the Boeing 737 that would suit more congested airports like Newark.

-By Doug Cameron and Kathy Shwiff, Dow Jones Newswires; 212-416-2357; Kathy.Shwiff@dowjones.com
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