Three of the nation's largest airlines have inked a deal that, in essence, would allow them to work in harmony against the competition.

Delta ( DAL) announced Friday that it plans to join the code-sharing arrangement currently operated by Northwest ( NWAC) and Continental ( CAL). The deal, requiring governmental approval, would allow the three airlines to sell seats and accept frequent flyer miles for one another.

The alliance comes as the nation's big airlines appear increasingly vulnerable to a weakening economy and increasing low-cost competition from carriers such as Southwest ( LUV), analysts say. Many analysts and investors suspect that at least a few of the major carriers will be forced into bankruptcy by the industry's declining economics.

The participating airlines insisted that they will continue to compete amongst themselves. But the proposed deal, they said, will level a playing field currently tilted in favor of US Airways and UAL's ( UAL) United, which are seeking a code-sharing agreement of their own.

Of course, the airline industry being what it is, a tilted field is largely in the eye of the beholder. US Airways, after all, recently filed for Chapter 11 bankruptcy protection, and United may follow in a matter of weeks, the company has warned. Both airlines could enjoy substantial cost reductions through the restructuring process.

"This proposed agreement represents an important part of our plan to strengthen our competitive position in today's extraordinarily difficult operating environment," said Delta Chief Executive Leo Mullin.

Darryl Jenkins, director of the Aviation Institute at George Washington University, applauded the proposal as a sound one.

"Certainly, this is preferable to a merger," Jenkins said. "It allows the airlines to increase revenues without increasing costs.

"That's the big deal with these alliances."

Watching

Jenkins said he expects the government to closely scrutinize the proposal, which would unite the nation's third-, fourth- and fifth-largest carriers. But he said he himself tends to favor such deals.

Jenkins also predicted that AMR's ( AMR) American, the nation's largest airline, would again come knocking on the government's door for reconsideration of a failed allegiance with British Airways ( BAB).

"It could get interesting," he said.

The industry's latest code-sharing proposal comes one day after major airlines -- led by Southwest -- capped their walk-up fares at $299 each way. Jenkins said Southwest gave the majors an excuse to do some fare-cutting that was necessary anyway.

"The fact that Southwest did it first allowed the others to follow without bloodletting," he said. "Now this will not be interpreted as the beginning of a fare war between the majors."

The industry, which posted widespread gains after Thursday's fare cuts, lost ground on Friday. Except for United -- up 6 cents, to $3.74 -- major airlines were in the red. The biggest loser was Northwest, down 3% to $11.10.

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