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U.S. Set to Fight Airline Alliance

January 22, 2003|From Bloomberg News

Federal officials Tuesday vowed to block a planned alliance of Delta Air Lines Inc., Northwest Airlines Corp. and Continental Airlines Inc. after the carriers rejected some government conditions aimed at promoting competition.

The Transportation Department will file an unfair competition complaint before an administrative law judge that may result in an order to stop the alliance unless the carriers agree to the restrictions, spokesman Bill Mosley said. The conditions include giving up some airport gates and limiting the flights on which they would jointly sell tickets.

The airlines, which together control a third of the U.S. air-travel market, vowed to defend their agreement "vigorously while continuing to implement it." The carriers also said they were open to negotiating a settlement. Mosley said the department is "not discussing negotiations."

Delta, the third-biggest U.S. airline, No. 4 Northwest and No. 5 Continental said their alliance might bring in as much as $475 million a year in revenue. They plan to sell seats on one another's flights, link frequent-flier programs and jointly market themselves to travel agents to boost sales that haven't recovered from a drop after the Sept. 11 terrorist attacks.

The complaint the department said it will file would be the first against a U.S. airline alliance under the 1998 unfair competition statute.

UAL Corp.'s United Airlines, the world's second-biggest carrier, and US Airways, the seventh-largest in the U.S., got federal approval for a similar alliance in October.

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