With airlines uniting, passengers may pay more
     DALLAS -- April 25, 1998 02:07 a.m. EDT -- Some of the nation's
 largest airlines are forming alliances to cut costs and attract
 passengers who have been turning more and more to the Internet for
 cheap tickets. But while the airlines may save money, some industry
 observers worry passengers will pay more.
     "It's the age-old argument. Whenever competition is stifled,
 prices invariably go up," said James Ashurst, a spokesman for the
 American Society of Travel Agents.
     On Thursday, AMR Corp.'s American Airlines, which had considered
 acquiring or teaming up with US Airways three times since 1994,
 announced an extensive marketing alliance between the two airlines.
     Since January, Northwest Airlines and Continental Airlines also
 have been attempting to get a partnership approved linking the No. 4
 and 5 airlines' systems.
     And a third deal between UAL Corp.'s United Airlines and Delta
 Air Lines dissolved Friday.
     The marketing and routing partnerships are the '90s version of
 classical mergers, analysts say, and since less competition spurs
 higher costs, the partnerships are causing concern about passengers'
 pocketbooks.
     "I don't want to be a Chicken Little, but I think the sky may be
 falling," said Paul Hudson, executive director of the Aviation Con-
 sumer Action Project. "We've been concerned that alliances equal
 cartels, and this would essentially make the U.S. industry not com-
 petitive, at least not like it's been over the last 20 years."
     There also are skeptics who wonder if the new alliances will
 ever get off the ground. Unionized pilots must approve the deals -
 - their concern apparently scuttled the United-Delta deal -- and
 questions already are being asked at the highest levels.
     President Clinton said Friday that the airlines' announcement
 "should provoke a lot of comment, a lot of thought." But Clinton
 said the White House had not fully considered the possible antitrust
 implications.
     Jay Walker, who runs priceline.com, a company that helps consum-
 ers find the cheapest airline tickets over the Internet, says the
 mini-mergers are necessary because airlines need new marketing to
 lure consumers back.
     A Commerce Department study this month said Internet users booked
 $827 million worth of travel business online last year -- triple the
 1996 figure -- and the bulk of the business was airplane tickets.
     But there is still a staggering amount of excess inventory,
 Walker said.
     "U.S. airlines have 500,000 empty seats a day. The airlines are
 looking hard on how to be effective," he said.
     Lehman Brothers airline analyst Brian Harris agrees there is
 overcapacity, and believes the alliances will have "minimal impact"
 on fares.
     "I don't think consumers should be concerned about these alli-
 ances," Harris said.
     Among the benefits consumers can expect from the alliances will
 be increased options to redeem frequent-flier miles on participating
 airlines and airlines offering seats on each others' flights, some-
 times called "code sharing."
     "The good news for consumers is a harmonization of schedules
 making it easier to connect and get from one place to another. Also,
 the extension of benefits for frequent fliers could be a significant
 plus," said Mark Shields, vice president of Mercer Management
 Consulting.
     Although code-sharing deals technically don't require government
 approval, the Justice Department has in the past ordered that certain
 code-sharing agreements be abandoned in cases it believed antitrust
 violations would have resulted.
     And federal regulators are sure to look at the airline alliances
 with similar concerns.
     "We're always interested in protecting consumers," said Gina
 Talamona, spokeswoman for the antitrust division at the U.S. Justice
 Department. "That's our main goal."
     But that's not the airlines' goal, argues Hudson, of the consumer
 activist group. He says price hikes will far outweigh the importance
 of frequent-flier benefits "because alliance partners are not going
 to compete on price, service or capacity."
     "It's just not going to happen," he said.
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