Airline Alliance Refuses to Accept Official Rejection

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I can not remember if the below article was posted to the forum...just
received it from a friend.....so sending it any way.


Airline Alliance Refuses to Accept Official Rejection
By Keith L. Alexander Wednesday, January 22, 2003; Page E01

In defiance of the federal government, three of the nation's largest
airlines will launch a marketing and code-sharing alliance -- and fly into
court.  Delta Air Lines, Northwest and Continental said yesterday that they
would begin selling tickets on one another's flights, even though the
Transportation Department has said it would take legal action to stop
them.  The Transportation and Justice departments ruled last week that they
would forbid the alliance unless the carriers accepted restrictions to
alleviate concerns about anti-competitiveness. The airlines turned up their
noses at the Transportation Department's conditions and said they expect to
have the alliance in place by summer despite government
litigation.  Travelers will have more flight options as long as the
alliance operates, which could be for the long term -- or something less,
if courts side soon with the government. Under the arrangement, each
airline's frequent fliers will be able to earn and redeem points on any of
the three carriers.

Finding a free ticket, however, may take some clever maneuvering. Delta has
about 29 million frequent fliers, Continental about 23 million and
Northwest about 19 million. Let the scramble for free seats begin.  Also
under the alliance, the airlines' airport lounge members will be allowed to
use any of the lounges. But if you're thinking of finding easy refuge from
the airport hubbub, you might think again.  "These lounges are going to be
overwhelmed," said Christopher J. McGinnis, editor of the Ticket, an
Atlanta-based travel newsletter. "These alliances are really more
pro-airline than they are pro-consumer."  That is why the airlines are
doing it even in the face of litigation. As long as the alliance endures,
the airlines will be able to attract more travelers with expanded routes
and the frequent-flier programs.
In its ruling last week, the Transportation Department said the marketing
agreement would be allowed if the airlines gave up all gates at airports
where they have fewer than six takeoffs and landings a day. Also, the
airlines would have to limit the number of flights they could sell together
and they could not submit joint proposals to companies and travel agencies
for new contracts.

In a joint statement, the three airlines said those conditions "undermined
the value" of the agreement and would cost them market share to other
airlines. The carriers argued that their alliance was similar to one
created by United Airlines and US Airways last year, which the
Transportation Department approved. The three airlines also pointed out
that Transportation's conditions were stricter than those set by the
Justice Department. The carriers agreed to comply with the Justice
Department restrictions.  In response to the government's ruling, Delta,
Northwest and Continental offered to revise their proposal. They agreed to
give up 13 gates at four of their main hub airports and at Boston's Logan
International Airport. The airlines also agreed to limit the number of
domestic, Canadian and Caribbean code-share flights to 2,600 in the first
year of the alliance but said they wanted to increase the number of flights
later. They also said they would offer joint bids only to companies and
travel agencies that ask for them, and that they would exclude companies
headquartered in any of the cities where the three carriers operate hubs.

Leo F. Mullin, Delta's chairman and chief executive, said that the airlines
were "disappointed" with the government's conditions and that they look
forward to resolving the disagreement in court. Challenging the
administration is risky for the airlines. As the industry has racked up
huge losses in the past two years, airline executives have trotted to
Washington several times, hoping to convince Congress that the government
should pay some of the added security costs to airlines since the terrorist
attacks of Sept. 11, 2001. Also, the Transportation Department approves
which airlines are permitted to add flights into government-controlled
airports such as Reagan National.  "The DOT is going to be unhappy, and
because they are a regulatory agency they can improperly punish you in the
future for things you bring before them. That's a risk you're taking," said
Jeffery A. Smisek, who oversees legal and corporate affairs for Continental
Airlines. "But I believe these are professional men and women and they
won't do that."

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