US authorities have cleared the airline industry's biggest ever joint marketing alliance despite opposition from low cost carriers.

Under the groundbreaking agreement, Delta, Continental and Northwest airlines will be able to sell seats on each other's flights.

But they will not be allowed to pool revenues, collude on fares or do anything else that might reduce competition.

The move is an attempt by the Bush administration to ease pressure on the airline industry, still reeling after the 11 September attacks and a weaker economy.

'Unsustainable' losses

R. Hewitt Pate, acting chief of the Justice Department's antitrust division, said: "This alliance agreement, as conditioned, has the potential to lower fares and improve service for passengers in many markets throughout the country.

"The operation of the alliance remains fully subject to the antitrust laws, and the department will be vigilant in continuing to monitor the operation of the alliance."

On Thursday, Delta Air Lines reported a $363m fourth quarter loss.

Delta chairman and CEO Leo Mullin called the losses "unsustainable".

Delta and Continental Airlines have so far managed to avoid following rivals UAL Corp and US Airways into Chapter 11 bankruptcy.

US Airways rescue

Like Continental which reported forecast-beating results on Wednesday, Delta have also been given a boost by aggressive cost cutting.

Both companies have also shed thousands of jobs in the battle to stave off bankruptcy.

Meanwhile, in a separate development, a US federal judge has approved plans by US Airways to present its reorganization plan to its creditors.

The centrepiece of the reorganization is $840m in emergency and long-term financing by the carrier's lead investor, Retirement Systems of Alabama.

The state pension fund will take a 36% stake in the airline.