- The Washington Times - Saturday, January 18, 2003

The Justice Department yesterday approved an alliance among Delta Air Lines Inc., Northwest Airlines Corp. and Continental Airlines Inc., provided they agree not to coordinate fares and don't combine competing nonstop flights.
Under the alliance, which could result in lower ticket prices, Northwest Airlines, Continental and Delta would sell seats on each other's flights, placing their own "code" on its partners' flights.
As a result, department officials said, there would be no sharing or pooling of revenue, so each carrier would continue to compete for passengers. Northwest and Continental have been operating under a similar arrangement since 1998.
Several low-fare airlines had lobbied against the deal, calling it a virtual merger among the third-, fourth- and fifth-largest U.S. carriers. Eight state attorneys general also opposed the agreement, saying it had the potential to stifle competition, raise prices and hurt service.
Major airlines have lost billions of dollars since the September 11 terrorist attacks in New York and Washington. They have been searching for ways to better compete with the low-fare airlines such as Southwest and JetBlue.
Delta has said the three-way arrangement would bring $150 million to $200 million a year in revenue, and Continental said the alliance would add $50 million to $75 million annually. Northwest won't disclose a revenue estimate.
"This alliance agreement, as conditioned, has the potential to lower fares and improve service for passengers in many markets throughout the country," said Acting Assistant Attorney General R. Hewitt Pate, who heads the department's antitrust division.
"The operation of the alliance remains fully subject to the antitrust laws, and the department will be vigilant in continuing to monitor the operation of the alliance," he said.
The department's conditions prohibit conduct the alliance carriers could use to collude on fares or otherwise reduce competition among themselves. One condition prohibits the carriers from code sharing on each other's flights wherever they offer competing nonstop service, such as service between their hubs.
The conditions also require the carriers to continue to act independently when setting award levels or other benefits of their frequent-flier programs and when they are competing for corporate contracts, Justice officials said.
The three airlines didn't immediately comment on whether they would accept the conditions and begin the alliance. "We are declining to comment until we've had a chance to review it," Continental spokesman Dave Messing said.
Justice officials said the alliance can benefit consumers by offering code-share service to new cities, increasing flight frequency or improving connections to cities.


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