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Continental Airlines and United Airlines announced plans to "extensively" cooperate, with the former gearing up to join the latter in the Star Alliance. While far short of the merger anticipated by many this year, cooperation between the two airlines would include "broad code sharing," reciprocal loyalty programs and coordination in many other areas.
By participating in Star Alliance as envisioned, Continental would request approval to join the antitrust-immunized partnership already established by United, Lufthansa, Air Canada and several other Star carriers; build "joint ventures" planned for the transatlantic, Asian and Latin American markets; and engage in multilateral loyalty program reciprocity.
The carriers said the transatlantic joint venture would include Continental, United, Lufthansa and Air Canada; allow for revenue sharing between the participants; and enable the carriers to "compete more effectively" with SkyTeam's transatlantic joint venture.
Such competition no doubt will include intense jockeying for lucrative corporate business, especially from multinational organizations that contract with carriers (or alliances) for programs spanning several continents.
Speaking this week at a Merrill Lynch conference, Delta CFO Ed Bastian said his carrier's planned merger with Northwest, and the four-way JV that also would include Air France and KLM, would make it "very difficult for anyone to overlook the new Delta."
"You can go together not only to each other's respective sales accounts, but you go together to everyone's sales accounts as a unified carrier," Bastian said. "One of the big challenges that Delta has faced over time is that we were locked out of a fair bit of corporate work given that we did not have access to [London] Heathrow and we didn't have access largely to Asia. We had some big holes in our network. The merger with Northwest now makes sure we are at the table each and every time that there is a sales negotiation, and being at the table is where you need to be."
Similarly, Continental would add global scale to the Star Alliance by bringing its international network, including the sizable transatlantic operation emanating from Newark. Continental also would likely participate in Star's comparatively mature joint corporate sales efforts.
Within the domestic U.S. market, United via code sharing would link its network (based around hubs in Chicago, Denver, Los Angeles, San Francisco and Washington) with Continental's (centered around hubs in Houston, Cleveland and Newark). It would create an enormous competitor for the proposed Delta-Northwest merged entity and further pressure American Airlines, which also had been seen as a possible Continental partner.
Already a United codeshare partner and Star Alliance member, US Airways told employees that it has not discussed with Continental code shares or a bilateral relationship, according to USA Today.
Continental's plans are subject to regulatory approval "and the termination of certain contractual relationships, including Continental's existing agreements with SkyTeam members that restrict its participation in another global alliance." The extrication from SkyTeam--intended to be completed "in a customer friendly manner"--may be complicated. For example, "a principal [SkyTeam] contractual restriction will not terminate until nine months after the closing of the proposed Delta/Northwest merger," according to Continental.
Meanwhile, American Airlines and oneworld alliance partners Iberia, Finnair, Malev and Royal Jordanian pulled their application for an antitrust-immunized partnership. The oneworld members filed for immunity in July 2007as a means to "remain competitive with other transatlantic alliances" and ensure "long-term competitive viability" for Iberia, Finnair, Malev and Royal Jordanian. An AA spokesperson said the dismissal was a "temporary" move that should be viewed as a "procedural technicality," and the five partners remain "quite committed" to obtaining immunity. The spokesperson would not rule out another attempt by AA and oneworld anchor British Airways to secure antitrust immunity, a possibility that AA executives have talked up in recent months and a development that may be hastened by the Continental-United announcement.
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