Feds give conditional OK to airline partnership

By Leslie Miller
Associated Press

WASHINGTON — The government conditionally approved an alliance among Delta, Northwest and Continental airlines yesterday that would allow them to sell seats on each other's flights if they agree to rules aimed at keeping air travel competitive.

Low-fare airlines lobbied against the deal, alleging it amounted to a virtual merger among the third-, fourth- and fifth-largest U.S. carriers. Eight state attorneys general also opposed the agreement, which they said could stifle competition, raise prices and lower standards of service.

Like most major airlines, Delta, Northwest and Continental have struggled financially since the terrorist accks of Sept. 11, 2001.

The "code-sharing agreement" approved by the Transportation and Justice departments would enable the carriers to reach more destinations without flying more planes and offer reciprocal perquisites such as frequent-flier miles.

David Stempler, president of the Air Travelers Association, said passengers like code shares for those reasons and because they think connections will be smooth-er on code-share flights.

But the federal action came with stiff requirements that some airline experts said would significantly mitigate the benefits.

"They're telling you how to run your airlines," said Darryl Jenkins, head of George Washington University's

Aviation Institute. "They're telling you where you can and cannot fly."

Representatives of the three airlines said they were reviewing the order and had no immediate comment.

The proposed rules prohibit code-sharing on competing nonstop flights to the 10 hub airports and forbid the airlines to make deals on fares, capacity or route changes.

The order also requires the m to give up at least 13 gates at four of their hubs: four at Houston's George Bush Intercontinental Airport, two at Detroit International Airport, five at Cincinnati/Northern Kentucky International Airport and two at DallasiFort Worth International Airport. And they must give up additional leases on airport gates used fewer than six times a day over two months.

Should the airlines agree to the conditions, the alliance would be the largest among U.S. airlines, covering 2,600 flights in the

United States, Canada and the Caribbean. A code-sharing deal approved in October allowed bankrupt United Airlines and US Airways to share passengers on 192 daily flights.

Smaller airlines believe the conditions are inadequate to dilute the three airlines' combined market power, according to Ed Faberman, who heads the Air Carrier Association of America. The Transportation Department said the three airlines would have about 35 percent of the market.

The smaller airlines wanted the government to require Delta, Northwest and Continental to relinquish leases at more of their hubs. Faberman said big airlines try to keep out competitors by keeping gates even if they're not needed.

Robert Mann, airline consultant at R.W. Mann & Co. in Port Washington, N.Y., said the order does not really help the airlines or consumers.

"There really isn't much in the deal for the airlines," he said. "There really isn't much in it for the general public or corporate fliers."