01/11/2002 - Updated 08:21 AM ET Aloha, Hawaiian airlines could share operations By Jayne O'Donnell and Barbara De Lollis, USA TODAY Hawaiian Airlines, which announced plans to merge with Aloha Airlines last month, says the two airlines are considering taking advantage of a provision slipped into the aviation security law that would allow them to legally share operations without completing a merger. The little-noticed provision was added by Sen. Daniel Inouye, D-Hawaii, more than two months before the two airlines announced their proposed merger. The law allows carriers with flights that originate and terminate in the same state to create a temporary partnership that would achieve some of the benefits of a merger but would not be subject to antitrust scrutiny by the Justice Department. Instead, the secretary of Transportation would have to approve the partnership. The partnership could run until October 2003 with the DOT's approval. The airlines say they still plan to complete their merger. However, the alternative offered by the law could help them while they await Justice Department approval or if the agency moves to block the merger on antitrust grounds. Major airlines are watching the Aloha-Hawaiian deal closely, as most have partnerships with one of the two to provide interisland transportation for passengers that the major airlines bring to and from Hawaii. Those arrangements allow fliers to book connecting flights on different carriers through one airline. Some major carriers are concerned that their businesses could be harmed if a merger leads to higher fares or fewer flights in Hawaii. The legislation originally grew out of Inouye's concern that Hawaii's struggling airlines would run out of money after the Sept. 11 terror attacks, says Jennifer Sabas, a spokeswoman for Inouye. "It was incredibly important the provision would allow them to at least talk about scheduling and coordinating their resources. Otherwise, our people can't move between islands," Sabas says. "As things went forward later, the economics, they decided maybe it was time to talk merger." A spokesman for TurnWorks, the Texas-based investment firm that's helping finance the $200 million merger, said the airlines have not yet decided to use the provision. "Both airlines are focusing on this section and making some determination on what they want to do," says TurnWorks spokesman Owen Blicksilver. "It's not a permanent solution." TurnWorks is headed by Greg Brenneman, a former Continental Airlines president who would be chairman and chief executive of the merged company. TurnWorks still plans to proceed with the merger and is already working with regulators to address antitrust concerns, Blicksilver says. Tuesday, TurnWorks submitted a plan to Hawaii's attorney general that, among other things, promises to temporarily cap fares for intrastate travel to appease residents' fears about rising fares. The airlines could be eligible for an exemption from antitrust laws previously allowed only for airline alliances involving foreign transportation. Since 1989, the Justice Department's antitrust division has had authority over airline mergers. International aviation alliances are decided by the Transportation Department. "There's no question in the past, the Transportation Department standard for airline mergers has been much more liberal than the Justice Department's," says James Weiss, a former Justice Department antitrust official. Weiss, a partner with the law firm Preston Gates, says Hawaiian and Aloha could put together a joint venture in which they would pool revenue, share profits and coordinate sales and marketing activities — much as they would in a full merger. The Justice Department has confirmed it's reviewing the Aloha-Hawaiian deal. The airlines have not yet filed any information with the Transportation Department, according to spokesman Bill Mosley. _________________________________________________________________ Send and receive Hotmail on your mobile device: http://mobile.msn.com