Governments to Benefit in Airline Accord : Transportation: Settlement granting discount fares stems from class-action lawsuit over alleged price fixing.

Major airlines agreed to pay $40 million in discounts to state and local governments to settle a third price-fixing lawsuit, a group of 10 state attorneys general said Tuesday.

The airlines settled a separate class-action suit last year brought by passengers by agreeing to pay out $458 million in discounts. The airlines earlier this year resolved a federal antitrust suit by agreeing not to announce price changes in advance.

State and local government agencies, which were not covered by the passenger class-action suit, are to get 10% discounts on flights for 18 months or until the $40-million limit is reached.

The latest suit was brought by attorneys general from Colorado, Connecticut, Florida, Massachusetts, New Jersey, New York, Ohio, Pennsylvania, Utah and Washington.

The settlement is subject to approval by a federal judge and applies to all 50 states, territories and their municipalities. Alaska, American, Continental, Delta, Northwest, TWA, United and USAir took part in the settlement.

The government discounts would be available directly through computerized reservations systems. Governments wouldn’t be required to file the claim forms required by millions of passengers who sought compensation from the class-action suit.

Passengers in the class-action suit could start getting discount coupons in December if the process goes as scheduled. Lawyers have separated the eligible passengers from those who aren’t entitled to coupons and plan to ask a federal judge to approve their decisions late this week or early next week, passenger attorney Ann Yahner said.

The price-fixing claims centered on an airline practice of announcing price changes in advance through the reservations systems. If competitors didn’t go along with the price change, it could be rescinded before it was to take effect.

The airlines agreed to settle the federal suit by agreeing to impose any price increases immediately.

That Justice Department settlement was supposed to make it riskier for an airline to raise prices. If an airline hikes fares and others don’t go along, the higher-priced airline could lose bookings.