MINNEAPOLIS -- Northwest and Continental formed a marketing and
code-sharing alliance that, if approved, will link the carriers'
domestic and international systems.
As part of the deal, Northwest agreed to purchase a stake in
Continental owned by Air Partners, an investment group, for $519
million. The group controls 51% of Continental's voting rights, but
Northwest said it would place the shares in a trust and allow
Continental to operate independently.
The arrangement -- which edged out a bid by Delta -- gives
Northwest access to Continental's foothold in Latin America, and
Continental gets the benefit of Northwest's much larger presence in
Asia.
The deal also links Continental to KLM, Northwest's partner, and
could ultimately include Continental partner Air France. Alitalia
already has alliances with both Continental and KLM-Northwest.
Northwest executive vice president Michael Levine said
passengers will be able to "travel seamlessly from Tokyo to Rio de
Janeiro or from Duluth to Lubbock" on a single ticket with through
baggage check-in. The carriers' frequent flyer programs will be
reciprocal. Those benefits, Levine said, will result in an
incremental $500 million in annual revenue by the third year of the
pact.
The long-rumored deal got the go-ahead when Northwest's pilots
indicated they would be willing to negotiate a waiver to their
scope clause. Northwest's machinists union, the carrier's largest,
came out in support of the deal.
Northwest president John Dasburg called it a "very positive
transaction" that doesn't incur the "human and capital costs" of a
merger. No layoffs or shutdowns are planned.
Continental chairman Gordon Bethune said that a deal with the
carrier's other suitor, Delta, would have resulted in "significant
loss of jobs."
Air Partners, led by David Bonderman and James Coulter, rescued
Continental from bankruptcy in 1993. Its shares will be placed in a
voting trust. On day-to-day maters, the trustee will vote the
shares in proportioto how Continental shares are voted.
Exceptions to that rule include transactions such as merger
proposals from other carriers, which Northwest could block. The
$519 million deal includes $311 million in cash and 4.12 million
shares of newly issued Northwest common stock.