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Wed, Apr 16, 2008

So... Who's Next? Airlines Weigh Merger Options

Analysts Say United, Continental May Join Forces Soon

The aviation world is still sizing up the merger of Delta and Northwest... and analyst predictions that pairing will set off a wave of airline merger-mania are about to be tested.

The Minneapolis Star-Tribune observes a combined Delta and Northwest will have the size and reach that almost guarantees competitors will respond. American Airlines, which suddenly finds itself the number-two airline, has been mentioned as a merger candidate, as have United and Continental.

So, will regulators allow the current six domestic network carriers to consolidate to three in the next year? Chances may be better than at any time in the past. Merger proponents note a perfect storm of growing international competition as foreign airlines deregulate and benefit from open skies agreements, soaring fuel costs, growing market share for low-cost carriers, and the dramatic spate of bankruptcies in the last two weeks.

Two things seem certain -- the Bush Justice Department won't be able to take life easy during its last year, and those ubiquitous "unnamed sources close to the talks" won't be out of work anytime soon.

United Airlines CEO Glenn Tilton has been a long-time advocate of industry consolidation, calling it "...but one of the changes necessary to achieve sustained profitability... we will take the actions we need to strengthen our global competitiveness..."

For his part, Tilton says UAL will entertain a merger, "when and if it is the right choice." While that sounds like a carefully measured response, the Chicago Tribune reports Tilton's message to workers Tuesday morning is already being interpreted within the industry as setting the stage for a possible United-Continental merger.

Tilton promised his employees that executives will, "stay focused on our customers and if there is news to report we will bring it to you directly."

Place yer bets...

FMI: www.united.com, www.continental.com

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