The US government on Friday approved a marketing partnership among three airlines -- Delta, Northwest and Continental -- but only on strict conditions designed to limit anticompetitive behavior.
The partnership, which is known as a code-sharing alliance and was approved by the Transportation and Justice Departments, would permit the carriers to sell seats on one another's flights and allow passengers to choose which frequent-flier program would be credited with miles flown. Passengers would also be able to use each airline's airport lounges.
In a statement, the Transportation Department said the partnership, which was proposed in August, raised "serious competitive issues" that could open the door for potential price and scheduling collusion. To prevent that, the department set several restrictions, including what the airlines' executives could discuss with one another, how the carriers could market themselves to corporate clients, the number of gates they can keep at airports and the type of routes the alliance can serve.
The three airlines said they were studying the Transportation Department's conditions and had no further comment.
Some industry experts said they would be surprised if the carriers agreed to such strict conditions, though others point out the airlines do not have much to lose. Opponents of the partnership, including several low-cost airlines, praised the Transportation Department's decision and said it was a good first step to maintaining competition.
In its decision, the department noted that the three airlines accounted for 35 percent of revenue per passenger mile in the industry and that 3,214 of their routes overlapped. This is in contrast to the market share controlled by United and US Airways, which received approval for a code-sharing alliance in October. In that case, the agency said, the two carriers accounted for 23 percent of the industry's revenue per passenger mile and had only 543 overlapping routes.
The Transportation Department said it was concerned that the three-way alliance would permit the airlines to strengthen their existing markets, possibly dampening competition with one another and other rivals, rather than allowing the carriers to expand their networks by entering markets they did not serve.
Northwest and Continental already have a code-share partnership, but officials said that it presented less potential for anti-competitive behavior because the routes of those carriers do not overlap significantly, and their combined market share is much less than that of the three-way alliance that included Delta.
"Given the broad nature of the discussions that will be required to implement the alliance, we are concerned that the communications among the carriers may lead to collusion, either tacit or explicit, on such matters as fares and service levels," the Transportation Department said.
To avoid that and other pitfalls, the agency imposed several conditions. Among the conditions the three airlines must accept:
They cannot establish a working committee and cannot coordinate on matters like pricing and scheduling.
They must give up underused gates at their hub airports and in Boston if requested to do so by the airport operators.
They must limit their code-share arrangement to 650 flights in each two-carrier combination.
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