- The Washington Times - Saturday, August 24, 2002

Delta Air Lines announced a joint marketing agreement yesterday with rivals Continental Airlines and Northwest Airlines as an industry under financial siege tries to redefine itself.
The alliance would allow the participants to earn money from shared resources while competing more effectively against other airlines, industry analysts said. Passengers could transfer among flights of the three airlines without buying separate tickets.
However, the airlines run the risk that government regulators will block the deal under antitrust laws intended to promote competition.
"Hopefully, the carriers will get incremental revenue they otherwise would not have," said Darryl Jenkins, director of George Washington University's Aviation Institute. "That's the purpose of these alliances, to keep customers you might otherwise have lost. The trend is toward very large marketing alliances."
The alliance announced yesterday is largely a response by Delta to a similar alliance United Airlines and US Airways are trying to operate. All three airlines compete along the Eastern Seaboard, particularly the Northeast Corridor.
"Enormous financial pressures threaten this industry," Leo Mullin, Delta's chairman and chief executive officer, said in announcing the alliance.
"The proposal will enable Delta, Continental and Northwest to compete on a more equal footing with United Airlines and US Airways, which announced a similar agreement earlier this summer."
The United-US Airways alliance awaits federal government approval. Federal regulators are reviewing it to determine whether the nation's second- and seventh-largest airlines could unfairly dominate Eastern airports and flight slots, thereby shutting out competition.
The Justice Department said this week it would take another 30 days to review the alliance.
The Delta-Continental-Northwest alliance raises similar issues.
"The deal faces significant regulatory hurdles as there appear to be considerable pockets of hub overlap," said Jamie Baker, an airline industry analyst for J.P. Morgan.
The airlines operate hubs or airports where their flights are concentrated in cities such as Dallas, Houston, Cincinnati and Cleveland.
"These could potentially result in unacceptable levels of city concentration," Mr. Baker said.
The Air Transport Association reports that major airlines earned 8.7 percent less money per mile traveled in July than a year earlier. Low fares from stiff competition mean an airplane must be at least 80 percent full to make a profit on a flight.
Delta is the nation's third-largest air carrier, Northwest is fourth and Continental is fifth. All of them posted second-quarter losses this year.
Under the agreement, Delta would "code-share" its mostly Eastern routes with networks of Northwest and Continental, which extend throughout the West and Midwest. Code-sharing refers to placing their flight codes on each other's flights, which makes them operate like a single bigger airline.
Passengers could earn frequent-flier miles on all three airlines. They also could transfer flights and baggage among all three airlines with only one ticket purchase. Passengers with lounge privileges could use the lounges of other participating airlines.
"This has always been perceived as a very low risk, minimal cost way of expanding a network," Mr. Jenkins said.
In an industry in which the major airlines are struggling to emerge from bankruptcy or trying to avoid it, the Delta-Continental-Northwest alliance is part of a trend, Mr. Jenkins said.
"It will probably be three or four big marketing alliances and they will be global in nature," he said.
Delta and Northwest plan to seek approval of the deal from unionized pilots concerned about losing leverage in contract negotiations. The alliance partners also plan to negotiate jointly with European airlines to extend their network worldwide.

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