Summary: Early in 1998, the six largest airlines, which account for nearly 70 percent of domestic airline traffic, announced plans to form three alliances involving Northwest and Continental, Delta and United, and American and US Airways. The alliances vary from a limited marketing arrangement, such as reciprocal frequent flyer programs, to more complex agreements, such as those involving "code sharing" or one partner's ownership of an equity share in the other partner's business. The airlines contend that these alliances will benefit consumers through expanded route networks and combined frequent flyer programs. Others argue that the alliances will undermine competition, ultimately reducing passengers' choices and increasing fares. This report (1) describes the status of each of the alliances; (2) examines, for each alliance, the potential beneficial and harmful effects on consumers; and (3) examines the authority of the departments of Justice and Transportation to review these alliances and the status of their reviews.
