Continental, Northwest, KLM Join SkyTeam Alliance Monday September 13, 4:04 PM EDT NEW YORK (Dow Jones)--Chief executives of nine airlines gathered in New York Monday to mark the expansion of the SkyTeam airline alliance, banding together in the face of rising costs and falling revenue. Continental Airlines Inc. (CAL), Northwest Airlines Corp. (NWAC) and KLM Royal Dutch Airlines on Monday officially joined the alliance, agreeing to handle each other's passengers, honor each other's frequent flyer programs and find ways to cut costs. "The alliance formed because you can't merge internationally. You've got to partner," said Continental Chief Executive Gordon Bethune during a press conference. Other members of the alliance, which formed in 2000, are: Delta Air Lines Inc. (DAL), Air France (AKH), Alitalia S.P.A. (AZA.MI), Aeromexico, Korean Air Co. ( 003490.SE) and CSA Czech Airlines (CAA.YY). Aeroflot Russian Airlines (AFLT.RS) and China Southern Airlines Co. (ZNH) plan to join the group within the next 18 months. Airlines at times have had trouble gaining regulatory permission to merge, as well as getting labor groups at separate airlines agree to common contracts. So instead, some airlines are combining their ticket sales and distribution functions to allow passengers to travel seamlessly between the carriers, through alliances. Executives said the alliance offers the airlines a global network that low- cost carriers don't have. The network is a selling point for business travelers in the carrier's home region, plus, airlines benefit from passenger feed off of partner carriers. Delta Chief Executive Gerald Grinstein said alliance partners enjoy fare premiums compared with rivals, and even with low-cost competition growing, that premium will likely remain at least 5%. The alliance expansion came one day after rival US Airways Group Inc. (UAIR) filed for bankruptcy protection again, blaming high labor costs and stiff low- cost competition. Many airline experts say the airline's chances of surviving aren't good. "You can never underestimate the power of prayer," Continental's Bethune said when asked if US Airways would emerge. The next step toward closer alliance partnerships is buying aircraft jointly. KLM Chief Executive Leo van Wijk said he is working with Northwest Airlines executives to consider buying Boeing Co.'s (BA) new 7E7 airlines together. KLM is also working separately with parent company Air France to buy Airbus A330s with similar cockpit configurations. Air France is a founding member of SkyTeam. As for the Boeing airplanes, van Wijk and Northwest Chief Executive Richard Anderson said they haven't made a down payment on the new, fuel-efficient 7E7s, nor have they decided to buy them. But the two airlines, which work so closely together that they share revenue on North Atlantic routes, are considering buying 7E7s with the same cockpit configurations and the same engine types, van Wijk said. Delta's Grinstein said he envisions the alliance one day jointly buying aircraft. That could work through various financing mechanisms. One airline might buy airplanes and lease them to the others, or a third party could buy planes and lease them out, Grinstein said. Airlines can save some costs by joining alliances, such as combining some sales functions. But the main benefit to airlines is in revenue. The idea is an airline can offer customers a global network, thus attracting more customers in the airline's local area. Vice versa, airlines also benefit because they gain international passengers from their partners. Delta's Grinstein said consideration for the rest of the SkyTeam alliance has come in to play as Delta revamps its own routes. Last week, the airline cut its presence in Texas, cutting Dallas/Fort Worth from hub status and dropping service to Lubbock and Amarillo altogether. Continental still serves the West Texas airports, and operates a hub in Houston. Despite the difficulty of international airline mergers, Continental's Bethune said he's still interested in buying Aeromexico or one of its partners. But he said Cintra S.A. (CINTRA.MX), AeroMexico's holding company, hasn't made a concrete proposal to Continental. Roger EWROPS