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New air alliance a challenge to Delta

The airline weighs its response to a United-US Airlines partnership.

©Associated Press
July 28, 2002

ATLANTA -- Delta Air Lines, long a stalwart of East Coast air travel, may face another threat to its decimated revenues from a proposed alliance between United and US Airways.

Financially troubled US Airways and United want to sell seats on each other's flights in a code-share deal that also would offer frequent-flier mileage on either carrier.

The new alliance is far more limited than United's bid two years ago to buy the airline, based in Arlington, Va. But the prospect of passenger siphoning remains a threat to Atlanta-based Delta, especially since United has a broad network in the West, where US Airways offers little service.

The new agreement also offers United access to cities in the Southeast and New England, where its service is sparse.

Delta officials contend the deal would come at their expense. "The objective of a code share is take revenue from someone else," Delta chairman and chief executive Leo Mullin told the Chicago Tribune. "Whatever revenue is diverted will be diverted from Delta."

Delta officials declined to discuss any response to the US Airways deal. The carrier also has been formulating a strategy, presented to its board Thursday, to respond to lower-cost carriers such as AirTran Airways, Southwest and JetBlue. No details have been released.

Last week, as the company announced a $186-million quarterly loss and warned of weak revenue all year, Mullin said a market-share shuffle will not go unanswered.

"Either through alliances of our own or through marketing actions, we will ensure and stabilize our competitive position and make it stronger," he said.

United, the No. 2 carrier, and third-place Delta, have an intense but cordial rivalry, not moving in on each other's key cities. The carriers also allow passengers to earn mileage credits on each other's domestic flights and access to their airport lounges.

United spokesman Joe Hopkins said Friday no decisions have been made on how the carrier's US Airways alliance would affect its partnership with Delta.

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