Midwest and Delta expand alliance

ATLANTA — Delta Air Lines Inc. is expanding a marketing alliance with Midwest Airlines, once an acquisition target of Delta rival AirTran Airways.

Atlanta-based Delta and Milwaukee-based Midwest said Monday they have agreed to a multifaceted alliance that will include reciprocity between their frequent-flier programs, new joint marketing efforts and expanded access to airport lounges throughout North America.

The agreement extends Midwest's marketing agreement with Northwest Airlines to Delta, which acquired Northwest on Oct. 29.

Under the new agreement, Midwest and Delta, which has a hub at Cincinnati/Northern Kentucky International Airport in Erlanger, frequent-flier miles can be earned or redeemed on either airline's network through Delta SkyMiles, Northwest WorldPerks and Midwest Miles.

The new arrangement will go into effect in June, while the frequent-flier portion of the agreement will begin later this year, the airlines said in a joint statement.

Both airlines will conduct expanded marketing and advertising campaigns to promote the new alliance. They also will expand the existing Midwest-Northwest airport club membership agreement to include Delta Sky Clubs.

Midwest's existing agreement with Northwest will be phased out and replaced with the new Delta agreement.

AirTran, a unit of Florida-based AirTran Holdings Inc., made a hostile takeover bid of $78 million for Midwest in 2005. AirTran raised its offer several times, topping out with one worth an estimated $445 million when it was made in August 2007. Each offer was rejected.

Midwest ultimately agreed to be sold to private equity firm TPG Capital for about $450 million.

AirTran executives said recently that they will add service to Milwaukee to continue to try to gain market share from Midwest.

During his prepared remarks in an investor conference Monday, AirTran chief executive Robert Fornaro didn't address the Delta-Midwest alliance specifically, but he did say that AirTran thinks it can grow in Midwest's home base without Midwest. He also cited the weak economy and how it has affected Midwest.

"We're very glad we were unsuccessful with that purchase," Fornaro said. He added, "The opportunity to expand in Milwaukee will be a very good one for us. We didn't have to buy that company. The opportunity is out there because of the poor economy."