United They Stand

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When the Federal Government refused to back troubled United Airlines' request for $1.8 billion in aid last week, executives at Continental Airlines and Northwest Airlines must have patted themselves on the back. In an unusual display of ganging up on one of their own, the two carriers had for months aggressively and publicly lobbied against the payout. But now the carriers, along with Delta Airlines, are pushing to form an unprecedented three-way alliance that is causing even more consternation among their competitors. The three airlines have asked the Department of Transportation (DOT) to rapidly approve the alliance, which would allow the carriers to "code-share" on domestic flights, make interchangeable their frequent-flyer programs and combine sales and marketing operations. The DOT allowed a similar deal between United and US Airways, but this one would be even larger, accounting for more than 35% of the U.S. air-travel market.

The proposal is being fiercely opposed by seven smaller carriers, including such moneymakers as Southwest, JetBlue and AirTran, which have filed formal complaints with the DOT. They claim that such alliances give too much market power to the large carriers and could drive smaller ones out of business and hurt consumers. Says Southwest CEO Jim Parker: "This alliance is really a de facto merger that is likely to result in less competition and higher prices." Airline observers are also concerned about how the DOT is reviewing the deal. Unusually, for a case with such large implications for U.S. travelers, the department has refused to open the matter fully for public consideration and has not made key documents available on its website, as it does for most other such matters. The department says it is conducting an informal review and that appropriate papers are available to the public. The small carriers made their case directly to Transportation Secretary Norman Mineta last month. Mineta will probably rule by the end of the year. --By Sally B. Donnelly