US authorities have proposed placing the most extensive conditions yet on the largest domestic alliance proposed so far: a pact between Continental, Delta and Northwest airlines.

However the carriers began a direct challenge to US regulators over their three-way marketing and codesharing alliance first proposed in August. The alliance won Department of Transportation (DoT) and Department of Justice (DoJ) clearances with considerable conditions after small and low-fare carriers had opposed the plan. The three had originally agreed to limit their hub flying and not to share revenues but instead accrue revenues to the carrier operating the flight in a bid to quell objections.

Going beyond the demands of the DoJ antitrust unit, DoT regulators also wanted the three to limit to 650 the number of flights that each could codeshare and wanted to place further restrictions on some 60% of new flights so that "under-served" markets would gain service. They also wanted the three to be ready to give up gates at four hubs and at Boston if the local airport deemed the gates under-used at fewer than six times a day. The would-be allies also faced strict limits on their ability to offer joint bids to corporate clients and travel agencies and on awarding frequent-flyer miles and other benefits.

George Washington University Aviation Institute director Darryl Jenkins called the conditions the most far-reaching yet devised. Northwest president Doug Steenland called the conditions, most notably that they be ready to surrender gates, a form of "long-term, continuing regulation" that would be "beyond the scope of usual antitrust" and a return to Civil Aeronautics Board-era rules. Its chief executive Richard Anderson said the added conditions would be such a "handicap to our business" and that the three would start their co-operation without accepting the most objectionable limits.

Within hours, the Transportation Department announced an enforcement action and administrative hearing, the first of its kind since 1998.

Delta and Northwest executives said they were not ruling out some degree of negotiation with the authorities, but a DoT spokesman said the action was not a bargaining move. Once the 35% share of the domestic market held by the three is aligned, and with 21% held by the already-allied United Airlines and US Airways, only American Airlines would remain unaligned domestically among the top tier.


Source: Airline Business