U.S. set to fight 3 airlines over marketing pact

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U.S. set to fight 3 airlines over marketing pact  =

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Tuesday January 21, 6:44 PM EST =


(Recasts with government challenge, adds Northwest comments)

By John Crawley

WASHINGTON, Jan 21 (Reuters) - The U.S. government said on Tuesday it wou=
ld challenge plans by three big airlines to proceed with a marketing alli=
ance in defiance of some conditions set by regulators to preserve competi=
tion.

Northwest Airlines Corp. (NWAC), Continental Airlines (CAL) and Delta Air=
 Lines Inc. (DAL) took an unusually combative stance earlier in rejecting=
 some of the Transportation Department's restrictions imposed on Friday i=
n exchange for clearance of their codesharing partnership.

The airlines challenged terms that could make them yield more airport gat=
es to new entrants and low-cost competitors than the 13 they would be wil=
ling to part with at four hub airports.

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They also opposed a plan to permanently limit the number of codeshare fli=
ghts, and objected to restrictions on marketing to corporations and trave=
l agents.

The carriers said they were prepared to fight the government in court if =
necessary. The Transportation Departmentresponded that it was taking step=
s toward preparing a complaint to present to an administrative law judge.=


"The DOT intends aggressively to enforce its statutory authority to chall=
enge the transaction and require such conditions as it deems necessary to=
 preserve competition," it said in a statement.

Northwest Airlines President Doug Steenland said in a conference call wit=
h reporters that the government was "looking to regulate airline behavior=
 above and beyond" what the law would require.

Steenland said there was no timeframe for the alliance, saying only that =
the carriers were planning to move forward.

CODESHARING LIMITS

Codesharing allows airlines to sell seats on each others' flights.

Many other codesharing deals have promoted the extension of route network=
s as a consumer benefit that will draw in new travelers. But the governme=
nt has said that in this case, plans to aggressively market to frequent f=
liers and corporate customers pose more of a risk to fair competition. Ex=
tending routes is not a major component of this agreement.

Delta, Continental and Northwest called the restrictions, which were unpr=
ecedented in scope for a domestic alliance, unnecessary and unfair but re=
luctantly agreed to many of them.

They also agreed to Justice Department restrictions to not codeshare on c=
ertain routes, which has been a more common approach by the government to=
 address the competition concerns of codesharing deals.

But the airlines were highly critical of the Transportation Department co=
nditions that could take away further airport gates, put permanent caps o=
n the number of codeshare flights and limit marketing to corporations and=
 travel agents.

"Some of DOT's conditions are unacceptable and we will not agree to them,=
" they said in a joint statement.

"These proposed conditions would undermine the value of the marketing agr=
eement to consumers, and, therefore, to the participating airlines," the =
carriers said.

The carriers proposed a series of counter measures that mitigate their co=
ncerns, but include language that is less restrictive than that proposed =
by the government.

"We offered what we thought were conditions that satisfied their concerns=
," Steenland said.

He added the carriers were willing to discuss the situation with transpor=
tation officials but noted that broad negotiations appeared out of the qu=
estion.

(Additional reporting Meredith Grossman Dubner in Chicago, John.Crawley@r=
euters.com, Reuters Messaging: meredith.dubner.reuters.com@reuters.net; 3=
12 408 8787)) =



=A92002 Reuters Limited. =


Roger
EWROPS

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