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United and Lufthansa Will Share Codes : Travel: New treaty allows the airlines to create world's largest combined route system. Meanwhile, United pressures unions to conclude buyout deal.

March 19, 1994| From Times Wire Services

A new aviation agreement between the United States and Germany will give United Airlines and Lufthansa German Airlines the largest combined route system in the world.

The preliminary agreement announced Friday, which is to be formalized in a treaty next month, will allow United and Lufthansa to tap each other's home markets and offer expanded international service by sharing computer reservation codes.

On another front, United appeared to be making little progress in talks with its pilots and machinists unions over a proposed employee buyout of the Chicago-based carrier.

The latest wrinkle in the buyout talks emerged when United withdrew a generous severance package for 5,000 kitchen workers. United had agreed to pay the benefits to workers in its flight kitchens when it sold the kitchens last year to Dobbs International, a unit of Dial Corp. The move to withdraw the benefits was seen as a warning to unions, which missed a March 15 target date for reaching a definitive agreement on exchanging concessions for a majority stake in the airline.

For United, the nation's second-largest carrier, the code-sharing agreement will mean that its customers can tap into Lufthansa's huge market in Eastern Europe and the former Soviet Union. Lufthansa is the largest airline serving those areas.

Originally, the cooperation agreement between both airlines was to go into effect in January. But the partnership was delayed indefinitely when the United States and Germany failed to approve an earlier aviation treaty negotiated last year.

Under the terms of the new air traffic treaty, Lufthansa will be entitled to fly directly to 25 U.S. airports. However, under the code-sharing agreement, Lufthansa will be able to offer its German customers routes to any destination in the United States served by either United or Lufthansa.

The U.S. Department of Transportation will probably give the Lufthansa-United deal the green light by May 1, and the cooperation deal will go into operation by June 1, authorities said.

Meanwhile, United's decision to withdraw benefits for kitchen workers was seen as a sign that United was pushing for a resolution to the buyout deal.

"It's all pressure tactics from United," said Barbara Beyer, president of Avmark, an aviation consulting firm in Arlington, Va. "They're up against a wall. They need these concessions, and they need decisions now. They can't afford to diddle around forever."

On the New York Stock Exchange on Friday, shares of UAL Corp., United's parent company, fell $1.50 to close at $127.625.

United is planning drastic reductions in its overhead by cutting costs on its short routes, where competition from discount carriers has pushed fares too low for the airline to make money.

The employee buyout has been seen as a way to achieve those cost savings without potentially crippling strikes. And just as the airline needs the savings to prosper in the changed industry, analysts say, employees need the deal in order to preserve their jobs.

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