NEW YORK (CNN/Money) - Delta Air Lines, the nation's No. 3 airline, announced a codeshare agreement with No. 4 Northwest Airlines and No. 5 Continental Airlines, a move that allows the three carriers to book passengers onto each other's flights.
Codeshare agreements help carriers increase revenue by making a larger network of flights and destinations available to their customers. The move follows an agreement between No. 7 US Airways and No. 2 United Airlines announced July 24. Continental said it expects the new agreement to help it offset the competitive threat of that proposed combination.
The three airlines in Friday's agreement say they will hold discussions with their overseas alliance partners about joining together the two international alliances. Delta has an agreement that includes Alitalia, Aeromexico, Air France and Korean Air, while Northwest and Continental's alliance includes KLM Royal Dutch Airlines.
Northwest and Continental have a long-standing alliance that at one time included Northwest owning a 14 percent stake in Houston-based Continental, a stake that it sold back to the carrier at the insistence of federal regulators.
Codeshare agreements also require approval of regulators, but since codeshare partners aren't necessarily allowed to discuss pricing and schedule plans with one another, approval of the agreements is far more common.
The combination is one way that the airlines can continue to attract customers even as they plan to cut their networks and capacity in a bid to deal with decreased demand for flying. Lucrative business fliers, who have cut back flying even more than leisure travelers, still demand the largest possible selection of flights and available cities from their air carriers.
All the major airlines other than discount carrier Southwest Airlines made deep cuts in their schedules last year in the wake of the Sept. 11 terrorist attack, which hit demand for travel. But the cuts have not been enough to return the carriers to profitability, and they have made plans for additional capacity cuts this fall.
Continental announced plans for an additional 6 percent cut in its capacity earlier this week. Delta told CNN/Money Thursday that it expects an 8 percent cut in its capacity later this year, while Northwest said previously announced plans to ground two of its older models of aircraft by the end of the year would lead to a 14 percent cut in capacity.