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Can an airline alliance do the same trick as a merger?
Continental

They couldn't agree on a marriage, but now they will try to live together.

Continental Airlines and United Airlines have announced a marketing alliance to get the revenue boost and efficiencies of a merger without the job cuts, integration issues, and politics of an actual combination.

"In a network business, there is significant value gained from linking with larger networks to provide truly national coverage and expanded global reach, and exploring new ways to reduce costs and improve efficiencies," Larry Kellner, chief executive of Continental, said in a statement.

Continental, the No. 4 airline, will leave the SkyTeam alliance and join United, the No. 2 airline, in the Star Alliance, with Deutsche Lufthansa, Air Canada, and other airlines.

United and Continental have long danced around each other, but Continental called off merger talks in late April. United had then turned to talk with US Airways, but those discussions have gone nowhere. Delta and Northwest Airlines are the only airlines this year that have tied the knot.

US Airways is also part of the Star Alliance, and USA Today's Today in the Sky blog says that nothing changes. "Our longstanding codeshare relationship with United remains intact, as does our status as a Star Alliance member carrier," US Airways says.

The forces driving new alliances are the same ones that drove talks on mergers: With crude oil above $135 a barrel, airlines cannot survive unless they can quickly cut costs and raise fares.

The U.S. airline industry is projected to lose as much as $9 billion this year.

United and Continental have already announced deep retrenching plans. Earlier this month, Continental said it would eliminate 3,000 jobs, or 6.5 percent of its workforce, and retire 67 older Boeing 737s.


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