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Delta, Alaska Air to expand marketing alliance

Delta, Alaska Air to expand alliance; speculation Delta could seek to acquire Alaska Air

November 14, 2008: 01:31 PM EST
NEW YORK (Associated Press) - Delta Air Lines Inc., which broadened its global reach with its purchase of Northwest Airlines, plans to expand a marketing alliance with Alaska Air Group Inc., a carrier that some industry observers have speculated Delta may have an interest in acquiring one day.
The marketing alliance expansion was scheduled to be announced Monday at a news conference at Seattle-Tacoma International Airport, where the chief executives of Atlanta-based Delta and Seattle-based Alaska Air will speak, according to an event advisory issued by the carriers.
Delta is the world's biggest carrier. Alaska Air operates Alaska Airlines and Horizon Air, which together serve more than 90 cities through their network in Alaska, Hawaii, the continental U.S., Canada and Mexico.
Delta's existing alliance with Alaska Air was launched in 2004, and there has been a relationship of more than 20 years between Alaska, Horizon and Northwest. Currently, code-sharing by Delta, including Northwest, extends to more than 100 markets served by Alaska Air, including Horizon, and code-sharing by Alaska Air extends to more than 30 markets served by Delta. Currently, Delta frequent fliers can book award tickets on Alaska Air flights that carry the Delta code.
On Monday, Delta will announce enhancements to those agreements, including plans for new service that would be supported by their code-sharing partnership, Delta spokeswoman Betsy Talton said.
Under code-sharing arrangements, one airline puts its name or code on a flight operated by the other, allowing it to sell tickets on the other's flights. The carriers, in turn, generally share that revenue. Code-sharing is considered a low-risk way for airlines to expand their networks without the added cost of more planes and employees.
Credit Suisse analyst Daniel McKenzie said in a research note in October that his firm has not ruled out the possibility of further merger and acquisition activity for Delta in the future. He said then that Alaska Air Group or New York-based JetBlue Airways Corp. "remain appealing targets, both with attractive assets and strategic positioning that would enable DAL/NWA to better compete with what we consider is an inevitable CAL/UAUA combination sometime down the road." Delta has not commented on the speculation.
Houston-based Continental Airlines Inc. and Chicago-based UAL Corp., parent of United Airlines, were said to have had discussions earlier this year, but they never announced a combination. Continental later said it would join a marketing alliance made up of several carriers, including United.
Both Delta and Alaska Air are coming off losses in the third quarter. For the three months ended Sept. 30, Delta reported a net loss of $50 million, or 13 cents a share, compared to profit of $220 million, or 56 cents a share, a year earlier. For the July-September period, Alaska Air Group reported a net loss of $86.5 million, or $2.40 per share, compared with profit of $81.8 million, or $2.01 per share, during the same period last year.
In afternoon trading Friday, Delta shares fell 25 cents, or 3.1 percent, to $7.92, while Alaska Air Group shares fell 30 cents, or 1.2 percent, to $24.99.