3 Big Carriers Revise Code Share Plan


Jan 20, 2003
Three Big Airlines Revise Code-Share Plan
Monday March 3, 7:36 pm ET
By John Crawley
WASHINGTON (Reuters) - The government said on Monday it was considering a revised proposal from three major airlines to launch a marketing agreement that regulators threatened to block over competition concerns.

Northwest Airlines(NWAC.O.), Delta Air Lines (NYSE:DAL - News) and Continental Airlines (NYSE:CAL - News) have revised their code-sharing plan to address elements that troubled regulators at the Transportation Department.
Code-sharing allows airlines to market and sell seats on each others'' flights, and offer reciprocal frequent flier benefits and other perks. It also permits carriers to sell their joint services to corporate customers.
The Transportation Department approved the 10-year alliance in January with six conditions, saying it raised serious competition concerns.
The carriers rejected three of the requirements, and announced they would proceed with their plan anyway. That triggered a threat from regulators to take the matter to court as part of a formal enforcement action. Such a step could disrupt or even stop the alliance from moving forward.
Such a proceeding could be a drawn-out and expensive process in which the federal government could seek sensitive financial information from the airlines that would be open to public scrutiny.
The standoff with regulators was virtually unprecedented, and industry sources said the airlines found little support from the White House or other high-level policy makers to defy the Transportation Department even though the Justice Department chose not to challenge the alliance on antitrust grounds.
Within the past few weeks, the carriers and regulators have been discussing ways to resolve their differences while avoiding a legal battle.
The airlines proposed on Feb 28 to alter the three conditions they currently oppose. They sought to change terms on relinquishing airport gates and facilities, amend restrictions on the number of code-share flights, and ease limits on how they can market the program to corporate customers and travel agents.
The airlines said they were pleased the Transportation Department had decided to review the new proposals. We remain confident that our agreement, as so conditioned, will satisfy the DOT''s concerns, they said in a joint statement.
But Ed Faberman, executive director of a trade group representing smaller airlines, the Air Carrier Association of America, said extensive research was needed to determine exactly what the revisions mean.
We think that some of this is smoke and mirrors, Faberman said. For instance, he said the government must analyze the carriers'' new plans for opening up underutilized gates and other facilities at several airports to other airlines.
Read Van de Water, assistant secretary for aviation and international affairs, said the agency still planned to take legal action if the airlines ultimately defy the agency''s terms.
The Transportation Department has sought public comment on the revised proposals through March 18, and said it would decide the matter by the end of the month. But Faberman said his group would ask for more time and possibly more conditions.