Continental, US Airways end talks

They sought to book seats on each other's flights


Continental Airlines said yesterday that it was breaking off negotiations with US Airways about a partnership in which the two carriers would have booked passengers on each other's flights.

The partnership, called a code-share alliance, would have allowed the airlines to advertise more destinations by listing both carriers' flights in their computer reservations systems. Under such arrangements, passengers can choose which airline's frequent-flier program will be credited with miles. Continental and Northwest have such an alliance.

Continental has said for a month or so that it was in talks with US Airways, the nation's seventh-largest carrier, about forming an alliance. US Airways has been talking to every major carrier except Delta Air Lines about a partnership in hopes of bolstering a restructuring plan. Continental and United were regarded by many people in the industry as the two front-runners.

But Continental, the fifth-largest carrier, said yesterday that the discussions had ended.

"Continental made the decision after it determined that an agreement would not be reached in the near future," the company said in a statement.

David Castelveter, a spokesman at US Airways, declined to comment

The move leaves United, the second-largest carrier, as the leader in the talks. Last week, Greg Taylor, senior vice president for planning at United, said his airline was "far and away the best fit" and that an agreement was close to being reached. But the pilots unions at both airlines would have to approve the agreement, he said.

"There's no change in discussions," Susana Leyva, a spokeswoman for United, said yesterday.

Taylor said the alliance could generate "north of" $200 million a year for each carrier. Airlines do not share revenue in such an arrangement. Instead, they pay the other carrier a booking fee if a reservation is made on the other airline. Most of the additional revenue would come from passengers booking multi-leg flights that use both airlines to reach destinations that neither airline could reach alone.

If United and US Airways reach an agreement, it would be submitted to the Department of Transportation, which would review it for antitrust issues. If the department takes no action - a process that normally takes a month but can be extended up to six months -the code-share alliance can take effect. Last July, the Justice Department blocked a proposed buyout of US Airways by United, but a code-sharing deal would be different because the two carriers would still be expected to compete against each other.

Although the industry was hit hard by the Sept. 11 attacks and the downturn of the economy, US Airways and United have suffered more than the other large carriers. US Airways reported a loss of $269 million last quarter and $2 billion last year. United lost $510 million last quarter and a record $2.1 billion last year. Both airlines have applied to the federal government for loan guarantees, and a code-share alliance between the two would help those applications.

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