AWA's New Fares Help Prompt CO To Cut Codeshare Tie

America West Airlines' new fare structure partly was to blame for Continental Airlines' decision to terminate its codesharing deal with the carrier as of May 1, said a Continental spokesperson. According to AWA officials, Continental yesterday also told them the carriers' reciprocal frequent flyer and airport club agreements will end on Sept. 24.

"The reasons were twofold," said the Continental spokesperson. "One, AWA has become more leisure-oriented in their product and market position, which is less consistent with our focus primarily on the business travel market. Also, incremental revenue attributable to the AWA codeshare agreement had been declining and approaching zero, and the pricing change had the effect of eliminating what little remained of the marginal benefit." Houston-based Continental in 2000 sold to America West what remained of its 1994, $18 million investment in the Phoenix-based carrier.

"America West and Continental have had a successful partnership that lasted nearly eight years," said W. Douglas Parker, America West chairman and CEO, in a press statement. "However, times change, and the value of the relationship to both airlines had dissipated over time."

According to Continental's 2000 annual report, codesharing and ground-handling agreements with America West netted Continental $7 million, $6 million and then $5 million in 1998, 1999 and 2000, respectively. America West estimated that the codesharing, frequent flyer and club arrangements with Continental accounted for about $15 million to $20 million in incremental revenue annually.

According to America West, Continental's action offers AWA, "the opportunity to pursue other alliance opportunities that may be better suited to our customers' needs."