This article from NYTimes.com has been sent to you by psa188@juno.com. United Partners Abroad Are Wary but Ready to Help December 10, 2002 By MARK LANDLER FRANKFURT, Dec. 9 - For overseas airlines that depend on United Airlines for access to American routes and customers, the most immediate problem posed by today's bankruptcy filing is semantic. "The word bankruptcy means something quite different in Europe," said Rolf Halbroth, a spokesman for Lufthansa. "A German would always see that as a company being taken apart." In the coming days, Mr. Halbroth said, Lufthansa and other partners of United will have to give their customers a short course on Chapter 11, the legal procedure that shields a company critically short of cash from its creditors, while allowing it to operate without interruption. At the Star Alliance, the network of 14 airlines dominated by United and Lufthansa, the watchword has quickly become "business as usual." It is true that passengers who travel on Star Alliance airlines will scarcely notice the bankruptcy in the short run. United has pledged to redeem frequent-flier miles and honor code-sharing flights with its partners, as well as continue to share reservations data and jointly market services. But fears about United's finances are likely to depress its traffic for a while. That will have a ripple effect on the foreign airlines, because they rely on United to feed them passengers from its United States routes. "People don't like booking on bankrupt airlines," said Olga Razzhivina, an analyst with Avmark, an aviation consulting firm in London. "They ask: `What happens if the airline closes? Will my tickets be reimbursed?' " Even if United works its way through its problems, the bankruptcy is a blot on the image of the Star Alliance, the oldest and largest airline network, which has been dogged by worries about some of its members in recent months. United was one of the club's founders in 1997, and is by far its largest, accounting for 1,800 of 10,728 daily flights by member airlines. It is also the crucial link for foreign carriers to the domestic United States market, which is otherwise off limits to them. If United does not emerge from Chapter 11 protection more or less intact, analysts say, it could throw the future of the alliance into doubt. "No global alliance can exist without access to the U.S. market," Ms. Razzhivina said. Perhaps recognizing this, Lufthansa has begun talks with United about some form of aid. There is a precedent for this: United and Lufthansa bought shares in Air Canada in 1999 to help it fend off a hostile takeover attempt financed by the AMR Corporation, the parent of American Airlines. "We will help our friends if we can," said Klaus Walther, senior vice president for communications at Lufthansa. "How we can support them is something we're discussing with our partners." Mr. Walther declined to speculate on what form Lufthansa's assistance would take. But he said Lufthansa would be eager to invest in United, provided that its money was secured and that United's ownership structure was overhauled. A majority of United's parent company - 55 percent - is owned by the airline's workers, a structure that Lufthansa officials say they think led to an erratic strategy. "The ownership structure brought United down to where it is today," Mr. Walther said. "Management must be able to make decisions, and to execute them. It that happens, there are lots of possibilities." Analysts said that any investment by Lufthansa would probably be secured by United aircraft or real estate. Last week, United and Lufthansa agreed to share sales and marketing on their North Atlantic routes. Mr. Walther said the deal was worth $90 million in cost savings and additional revenue. The ties between Lufthansa and United are particularly tight because the two share codes on 330 flights a day. That enables a Lufthansa passenger to fly, say, from Frankfurt to Chicago, and then connect to a United flight to another destination in the United States, while traveling on a Lufthansa ticket. Other trans-Atlantic alliances, like the one between American Airlines and British Airways, are more restricted because of the lack of an open-skies agreement between the United States and Britain. The future of the United's code-sharing flights could also be thrown into doubt by the bankruptcy. If the airline decides to shed some of its routes as part of a cost-cutting regimen, and those routes are shared with a foreign carrier, then the foreign airline could lose the route as well. Analysts say this is more likely within the United States than in United's overseas network. The airline's North Atlantic routes are solidly profitable, thanks to business travelers, and its Asia routes, which radiate from a hub at Narita Airport in Tokyo, are the envy of the industry. "United would never give up its routes in and out of Tokyo," said Jim Eckes, a consultant at Indoswiss Aviation in Hong Kong. "The hub system is one of the things that will lift them out of bankruptcy." Officials at the Star Alliance say they are not in a position to broker financial deals between their partners. But they are helping to coordinate a public relations campaign in the wake of the bankruptcy filing. "We're trying to make it crystal clear that Chapter 11 has different implications in the United States," said Christian Klick, a spokesman for the alliance, which is based in Frankfurt, and includes, among others, Singapore Airlines, Thai Airways, All Nippon Airways and SAS. United's travails are only the latest blow to the cohesion of the alliance. One of its partners, the Brazilian airline Varig, is also in deep financial difficulty. Another, Air New Zealand, may soon have an aggressive new stakeholder, Qantas of Australia, which could force it to jump to Oneworld, the No. 2 global network, which includes British Airways and American Airlines, big United rivals. "That would leave Star completely bereft in this part of the world," said Tom Ballantyne, chief correspondent in Sydney for Orient Aviation magazine. "At Star, they call Australia the `white hole.' " http://www.nytimes.com/2002/12/10/business/10GLOB.html?ex=1040529596&ei=1&en=d70f0b98a625f90b HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact onlinesales@nytimes.com or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to help@nytimes.com. Copyright 2002 The New York Times Company