USAir, Air Canada are considering 'strategic alliance'

August 20, 1991|By Peter H. Frank Dow Jones News Service contributed to this article.

USAir and Air Canada, two airlines struggling to compete with the giants of the industry, are exploring the idea of linking routes and other operations to broaden their reach and cut costs, the two companies said yesterday.

The agreement in principle called for the two companies to combine such areas as operations, technical research, marketing and investments, the companies said. No timetable has been set for consummating the "strategic alliance," spokesmen for the companies said.

Yesterday's announcement stemmed from on-again, off-again talks begun by USAir and Air Canada as both companies battle the effects of a recession that has badly squeezed an increasingly troubled airline industry in this country and Canada.

Both companies have absorbed significant losses over the past year and announced major restructurings that have cut thousands of workers from their payrolls.

USAir, the sixth-largest airline in the United States and the dominant carrier at Baltimore-Washington International Airport, operates a strong domestic network but has little presence in overseas routes. The airline said the potential alliance could stretch its network throughout Canada, Europe and Asia.

Air Canada said that it expected the partnership, which would not be a full-fledged merger, to provide an opportunity to tap the U.S. market and expand the number of cities it serves in this country.

Dave Shipley, a spokesman for the airline's parent, USAir Group Inc. in Arlington, Va., said that he expected the two companies to "dovetail" their businesses by offering joint pricing packages on connecting routes, exchanging frequent-flier mileage points and combining other marketing programs.

USAir has trimmed its work force by 7,000 workers over the past year to about 45,000 workers. The company lost $56.8 million during the three months that ended June 30 and $680 million over the past 18 months.

In an unrelated announcement yesterday, USAir said it would discontinue operations at its Dayton, Ohio, hub next January. The company said it had lost about $45 million on the Dayton operation during the past 18 months.

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