• The Wall Street Journal , Friday, June 20, 2008 10:15 AM

A marketing pact announced Thursday between United and Continental airlines -- the nation's No. 2 and No. 4 in terms of traffic -- should help them forge close domestic ties and act in concert on international routes. Such a deal also avoids the labor tensions, service disruptions and high upfront costs of a merger.

United has long coveted some kind of relationship with Continental, as their combined route network is complementary and powerful. Chicago-based United is strong in the Pacific and in the western U.S. Continental, based in Houston, has extensive routes to Latin America and a big hub in Newark, N.J.

Continental, which currently has marketing relationships with Delta and Northwest and is a member of their SkyTeam global alliance, will join the Star Alliance, a global marketing group of 20 airlines anchored by United and Deutsche Lufthansa. The agreement probably won't go into effect until late next year. Continental must extricate itself from its current relationships before entering the Star Alliance. Both tasks are expected to take at least 12 months, and the deal will require regulatory approval.

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