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. Last Updated: 07/27/2016

Airline Alliance Resists Anti-Collusion Rules

NEW YORK -- Three large airlines said Tuesday they would defy efforts by the U.S. Transportation Department to place restrictions on a marketing alliance and proceed with the partnership on their own terms.

Transportation officials had criticized the plan as being potentially anti-competitive.

The decision by Delta Air Lines, Northwest Airlines and Continental Airlines prompted the Transportation Department to say that it would act to force the carriers to comply with strict conditions it had laid out Friday.

The carriers said Monday the conditions were too onerous and that they would abide by a looser set of limitations they had proposed on things like the number of gates they use at large airports and the number of flights that will become part of the marketing arrangement, known as a code-share alliance.

Executives at the airlines said this was the first time in recent memory that these carriers had started on the path to a legal battle by defying the agency. But they argued that the alliance would not be anti-competitive and that the agency's conditions would hamper how much revenue they would be able to make from the alliance.

A partnership with minimal restrictions, they said, is crucial to attracting customers during the industry's worst downturn in history and to competing against low-cost carriers like Southwest Airlines. They also pointed out that the Justice Department approved the alliance Friday with a more lenient set of conditions.

Douglas Steenland, president of Northwest, said that if the carriers were to abide by the Transportation Department's conditions, the alliance "wouldn't deliver the economics that we were looking for."

The three carriers have estimated that the partnership would bring in an additional $600 million a year by siphoning passengers from rivals. Continental and Northwest already have a code-share alliance, but transportation officials said that the addition of Delta would create a partnership with too many overlapping routes and too high a share of industry revenue.

The Transportation Department said Friday that the three-way arrangement, proposed in August, could potentially lead to collusion among the three carriers and result in artificially higher fares for passengers. The agency asked the airlines to agree to turn over crucial underused gates to airport operators if asked to do so, limit the number of flights that would operate under the code-share alliance and refrain from making joint bids for corporate travel contracts, among other things.

The three airlines said in a written statement Monday that should transportation officials "bring an enforcement action regarding the marketing agreement, the carriers intend to defend their marketing agreement vigorously while continuing to implement it."

A code-share alliance allows airlines to sell seats on certain of each other's flights.