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NEW YORK - United Airlines, the second largest carrier in the United States, has opened merger talks with smaller rival Continental in a move that could create a US$9 billion ($12.98 billion) industry giant.
If the merger proceeds, it will create the world's largest airline. The talks come amid heightened merger activity in an airline sector emerging from a prolonged slump after the September 11 terrorist attacks.
US Airways last month made an unsolicited bid for larger bankrupt rival Delta Air Lines, AirTran this week offered to buy Midwest Air and bankrupt Northwest Airlines is evaluating strategic alternatives.
"Everyone talks to everyone all the time but [United and Continental] renewed contact after the USAir and Delta situation emerged," a source said. "At the moment, it's just talks."
Despite potential hurdles, the combined company, which would surpass American Airlines as the world's No 1 carrier in passenger traffic, would have many interesting components.
United brings its strength on the West Coast, coveted gates at London's Heathrow and its strong presence in the important Chinese market. Continental offers its key Newark (New Jersey) hub, transatlantic access and a strong presence in Latin America.
"It makes a lot of sense," said Roger King, an analyst with CreditSights. "It would be a good aggressive strategy by United and a good defensive strategy by Continental."
- REUTERS
