=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SF Gate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2002/06/03/f= inancial1200EDT0085.DTL ---------------------------------------------------------------------- Monday, June 3, 2002 (AP) KLM may form pact with Northwest, Continental NEIL MOORHOUSE, Dow Jones Newswires (06-03) 09:00 PDT (AP) -- AMSTERDAM, Netherlands (Dow Jones/AP) -- KLM Royal Dutch Airlines NV extended its codesharing agreement Monday with Continental Airlines Inc. and said the U.S. airline could become part of a three-way Atlantic venture with partner Northwest Airlines Inc. The move comes as airlines scramble to cooperate, via short-term alliances, in a bid to cut costs and boost revenue in the wake of the Sept. 11 terror attacks on the United States -- which saw passenger volumes tumble and forced operators to cut capacity. KLM said that a KLM-Northwest-Continental link could be just months away although competition authorities would have to approve such a deal. Continental is Northwest Airline's domestic partner. Continental is based in Houston, and Northwest is based in Eagan, Minn. "Continental, KLM and Northwest Airlines are continuing to discuss the possibility of longer-term and deeper cooperation," KLM said. "This cooperation could involve KLM and Continental, together with Northwest forming a joint venture for a portion of their respective transatlantic operations." The codesharing agreement with Continental Monday was extended both in terms of duration and routes covered. The new agreement will end May 2003. Analysts said that the extension of the codesharing agreement was positi= ve and operationally beneficial but wouldn't have a major financial impact. It would only create the opportunity to offer more routes and attract more passengers. They will code-share on selected flights to destinations in Europe, the Middle East and Africa operated by KLM, which connect with Continental's nonstop flights between Houston and Amsterdam. Together, KLM and Continental create 68,000 city-pair connections. The two currently codeshare on nonstop flights between Amsterdam and New York as well as on selected United States destinations. "They are extending the marketing agreement which suggests the cooperati= on has so far been delivering good (performance) to both companies," said SNS Securities analyst Geert-Jan Hoppers. He said if the codesharing were extended to a venture including Northwes= t, there would be little overlap, because Continental operates in the southern part of the United States while Northwest concentrates further to the north. "And KLM would be a great opportunities for both U.S. airlines in Europe= " Hoppers said. Hoppers said he didn't think there would be any regulatory issues in such a venture because the United States airlines aren't on the main routes to the big cities, such as New York. After a string of botched attempts to find a European partner, KLM recently said it now saw less urgency in merging and more value in forming alliances across Europe, avoiding the bureaucratic, legal and ownership hurdles that have held up mergers in the past. KLM had long pinned its hopes on a full-fledged merger to keep it among Europe's key players. Several attempts to join forces with Europe's largest carrier, British Airways PLC, most recently in 2000, ended in failure. A merger with Alitalia was also scrapped in 2000 over uncertainty about the future of Milan's Malpensa airport and the stalled privatization of the Italian carrier. KLM is in talks with several airlines in Europe on cooperation deals. It currently has an agreement with BA for Middle East flights and tactical cooperation with Italian airline Volare. Besides a partnership with Northwest Airlines, it has cooperation arrangements with Hungarian airline company Malev Rt and Malaysian Airline systems. =20 ---------------------------------------------------------------------- Copyright 2002 AP