- The Washington Times - Thursday, October 3, 2002

From combined dispatches
UAL Corp.'s United Airlines and US Airways Group Inc. can immediately begin a marketing alliance designed to help the unprofitable carriers increase revenue, the Department of Transportation ruled.
"The alliance should increase competition in certain markets while providing service benefits for a number of travelers," the department said in a statement. The ruling lets the carriers sell tickets for one another's flights, expanding their networks and building revenue, while remaining separate. Some small carriers have said the plan may hurt competition.
The regulators, though, said they would monitor the so-called code-sharing agreement closely and would take action against the airlines if they found the venture dampened competition.
The "code-share" term comes from the practice of putting an airline's two-letter industry code onto another's flights.
Glen Tilton, United's chief executive, said the decision was great news for the airline.
"Our customers will enjoy expanded service options and frequent-flier benefits, as well as access to each carrier's airport clubs," he said.
United and US Airways, the nation's No. 2 and No. 7 carriers, announced the alliance July 25. The plan is part of US Airways Chief Executive Officer David Siegel's effort to lift the carrier out of bankruptcy protection and restore profit, perhaps ultimately leading to its inclusion in United's international Star alliance to boost annual revenue by $200 million.
A similar proposed marketing alliance involving Delta Air Lines Inc., Northwest Airlines Corp. and Continental Airlines Inc. "remains under review," the department statement said. Those three carriers, the nation's third-, fourth- and fifth-largest, said they formed their proposed alliance to respond to the United-US Airways plan.
Mr. Siegel envisions shrinking US Airways over the next few years while increasing the carrier's use of regional jets at its commuter partners to help funnel passengers to its key East Coast city airports. That passenger flow also will fill up flights for United and the Star alliance.
Small air carriers oppose the agreement, fearing the bigger airlines will be difficult to compete against because of their marketing clout and dominance of airport facilities.
"I would call it a virtual merger," said Ed Faberman, executive director of the Air Carrier Association of America, which represents smaller airlines. "There's no other industry that this would be permitted in."
Smaller airlines are also concerned the government will approve the Continental-Delta-Northwest alliance, giving the five airlines about 60 percent of the market, Mr. Faberman said.
United and US Airways have about 20 percent, he said.
Under the restrictions, the United and US Airways cannot:
Code share on local traffic on routes where both offer nonstop service, such as Philadelphia-Los Angeles.
Code-share on nonstop flights to the same destination from Washington Dulles International Airport or Ronald Reagan Washington National Airport, except for flights between Washington, LaGuardia Airport and Boston's Logan Inter-national Airport.
Have different fares on routes served by only one airline.
Fail to act independently when establishing their frequent flier programs and bidding corporate contracts.

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