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United, Delta Agree to Share Some Services

From Associated Press

UAL Corp.'s United Airlines and Delta Air Lines Inc. agreed Thursday to link their route systems in a combination that would control more than one out of every three seats on U.S. airlines.

The Delta-United alliance would tie together the carriers’ frequent-flier programs, allow qualifying passengers access to the other airline’s airport club rooms and permit the airlines to sell seats on each other’s planes.

“We believe that alliances are the competitive wave of the aviation future . . . because our customers and the global economy will settle for nothing less,” said Gerald Greenwald, United’s chairman and chief executive.

The deal is subject to the approval of both carriers’ pilot unions. Moreover, the Justice Department has said it will examine the pact, along with a slew of alliances announced recently by other U.S. carriers, for its potential effect on consumers.

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“We’re going to look at them from a narrow view, a broad view, a side view, any view it takes,” John Nannes, deputy assistant attorney general for the department’s antitrust division, said at a House subcommittee hearing Thursday.

There are no laws governing the formation of such alliances, although lawmakers and the Clinton administration have said they will act if the agreements begin to hurt consumers.

United, the nation’s leading carrier, is strongest in the Midwest and West. Delta, the No. 3 carrier, has strong operations along the Eastern Seaboard and in the South. The airlines estimate full implementation of the alliance could bring in $600 million in new revenue.

The deal would allow both carriers to offer their customers new flights. United would serve 39 new cities and offer 2,528 new daily nonstop flights. Delta would serve 17 new cities and have 2,074 new daily nonstop flights.

The pact is the latest in a series of such deals among domestic carriers. While the airlines have praised their proposed linkages as a way to promote seamless global air travel, consumer advocates have said they’re worried such alliances will mean higher fares.

But Greenwald said that “the benefits to the consumer far outweigh any, what I would argue to be, ghosts and myths dealing with anti-competition.”

Plans call for the agreement to be implemented first in the United States and then internationally, pending the approval of foreign partners and the governments affected, United said.

The two airlines came within hours of announcing an alliance last week, but the talks were suspended after Delta pilots demanded a voting board seat as a condition of further negotiations. Delta Chief Executive Leo Mullin said the issue was not immediately resolved and remains on the table.

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“The union will perform a thorough analysis of the proposed arrangement, as well as receive input from the Delta pilot group, before any conclusions can be drawn about the merits of the proposal,” said Dennis Dolan, chairman of the Delta chapter of the Air Line Pilots Assn.


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