Continental and United are planning a collaboration that could see the two carriers integrate many of their business functions, including procurement, and see the Houston-based carrier leave SkyTeam for the larger Star Alliance.

The framework agreement signed today also would add Continental to an anti-trust immunized partnership of eight Star Alliance members. Of this group, Air Canada, Lufthansa and United plan to create a joint venture with Continental that would mirror that tentatively approved by the U.S. Transportation Dept. permitted for SkyTeam partners Air France/KLM, Delta and Northwest.

That accord includes revenue sharing and extensive route expansion programs.

Few concrete details are being disclosed by either carrier, and in a joint statement they note that implementation is subject to regulatory approval and contractual restrictions, notably Continental's agreements with SkyTeam members. One such deal will not terminate until nine months after the closing of the proposed merger of SkyTeam members Delta and Northwest.

Neither Continental nor United are commenting on the cost or monetary benefit of the proposed accord.

Apart from the public invitation to join Star and the extension of anti-trust immunity, Continental and United say they plan to form a domestic codeshare and establish frequent flyer and lounge reciprocity.

Continental and United also intend to establish joint ventures similar to the transatlantic accord with partners in Latin America and the Asia/Pacific region.

"Continental's plan to partner with United and join the Star Alliance will provide substantial new opportunities for all of our customers," said Continental Chairman and CEO Larry Kellner. "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."

United Chairman, President and CEO Glenn Tilton, who at one point had considered a merger with Continental, added that teams from both carriers had over the past weeks created a proposal that would achieve quantitative efficiencies and synergies. "The teams worked well together to identify opportunities to create a unique and competitive partnership extending well beyond a traditional codeshare agreement," he said.

US Airways, which is absent from the planned Star transatlantic joint venture, has issued an internal memorandum stressing that its relationship with United and Star Alliance will not be affected by Continental's introduction. US Airways also noted it has not discussed either codeshare or bilateral possibilities with the Houston-based carrier.

SkyTeam representatives were not available for comment.

Photo: Benet Wilson