Graham Warwick/WASHINGTON DC
Delta Air Lines and United Airlines are bracing for a US Government review of their planned code-share alliance, which also requires the approval of both carriers' pilots unions.
The US Department of Transportation (DoT) confirms that it will request data on the alliance, as it has on the Northwest Airlines/ Continental Airlines and American Airlines/US Airways deals, although domestic code-shares do not require formal Government approval.
The new domestic alliances, because of their scale, require review to ensure that they are not anti-competitive, the DoT says, adding: "We have a responsibility to maintain a competitive aviation system." Delta and United say that they are prepared to supply any data the Government requests and do not anticipate problems.
Primarily to avoid anti-trust issues, the airlines will limit their alliance to code-sharing and linking frequent flier programmes. The carriers say that they will remain independent and continue to compete. Code-sharing will be implemented initially in the USA and later expanded internationally - but not to Europe, "because of the uncertainty and complexity of the European regulatory environment", says United.
"This is not a merger, it's not anti-competitive and it's not complete," stresses United chairman Gerry Greenwald. The biggest potential obstacle remains the pilots, who can block any codeshare deal. Delta's pilots forced a delay in the announcement of the alliance by demanding a voting seat on the board as a precondition for considering the deal. Delta president Leo Mullin refused, but the demand will be considered in talks with the pilots on the alliance, he says.
United's pilots already have a voting seat on the board, but must still approve any code-share. Both airlines stress the growth opportunities expected. They estimate that code-sharing would generate $600 million in additional annual revenues after three years - $400 million of that in the USA - through increased passenger traffic resulting from improved connections.
This estimate assumes that the American/US Airways and North-west/Continental code-share deals do not reach fruition. Even if they do, Greenwald and Mullin say, the Delta/United alliance would still generate additional revenues. The airlines hope to link their frequent flier programmes later this year, and begin domestic code-sharing early in 1999.
Expanding the alliance internationally will require the approval of existing code-share partners and affected governments. Greenwald says that the Delta deal "-is independent of and unrelated to" United's plans to expand its Star Alliance. Both airlines have European partners, one reason given for "carving out "Europe from the agreement. The other is European Commission plans to examine airline alliances. On Europe, Greenwald says: "I never want to say 'never', but, at the moment, that's where it is."
Source: Flight International
