New York, Aug. 24 (Reuters): Delta Air Lines announced plans on Friday to forge a marketing pact with rivals Continental Airlines and Northwest Airlines, but analysts blasted the deal as a hasty competitive response that will build overlap in the airlines’ route networks.
The broad marketing alliance would allow the air carriers to tap new sources of revenue and could help offset stronger competition from a similar pact recently forged between United Airlines and US Airways Group.
Delta, the third-largest US airline, would connect its strong network of routes in the southern United States with the networks at Continental and Northwest, which are solid in the West and Midwest.
But analysts criticized the pact and said that throwing Delta into the mix would create redundancies in the three airlines' route coverage and potentially prompt increased regulatory scrutiny.
"Delta has made it clear that it feels threatened by the proposed United and US Airways alliance," said JP Morgan airline analyst Jamie Baker. "Absent the United/US Airways proposal, I don't think we would have seen Delta take any action."
A major push toward alliance-building has been under way since the Sept. 11 attacks battered demand for travel, forcing cash-thirsty air carriers to seek new ways to grab revenue.
"Unfortunately, alliances don't create new demand, they just redistribute pieces of the existing pie," Baker said.
If the deal goes through, travelers could earn and use frequent flyer miles on all three carriers, though there are already far more frequent flyer miles outstanding than the nation's airlines can redeem.
Road warriors stuck for hours in airports could use the airport lounges of each carrier interchangeably, and getting tickets and checking luggage for a trip on more than one of the three airlines would be easier.