Airlines Choosing Their Partners Ahead Of Delta Announcement

You could probably see this coming. Just days after ANN reported Continental Airlines CEO Larry Kellner was cool to the idea of pursuing a merger with another airline, a report in the Financial Times of London suggests his earlier comments may have been a head-fake.

The paper quotes unnamed sources close to the companies in reporting United Airlines may be considering a new round of talks to merge with Continental, if Delta spurns United and decides to merge instead with Northwest.

United CEO Glenn Tilton, in a message to employees on the subject Friday, continued advancing the notion of consolidation, and said it's important for the company to remain in control of its destiny. "Our position has always been that we control our decisions; no one makes them for us. The advantage of our situation is that we have choices that we continue to consider with our board," Tilton said.

The FT's sources also reportedly said United and Continental discussed merging a year ago, when it appeared a hostile US Airways bid for then-bankrupt Delta might set off a wave of industry consolidation. United and Continental have declined official comment.

Record fuel prices, a slowing US economy and pressure from some high-profile shareholders have moved airlines to find ways to cut costs, reduce unprofitable routes, and extend global reach.

As ANN reported, as a condition of Northwest's stake in Continental, the Houston-based carrier can't proceed with any merger deal without the official blessing of Northwest. One of the few exceptions is triggered if Northwest itself merges with another airline. If that happens, Continental can get out from under Northwest's thumb for a single, $100 payment.

Despite official contentions both carriers are in the running for a merger with Delta, Northwest is seen by many as the odds-on favorite over United. Northwest offers a more complimentary route network for Atlanta-based Delta, and both airlines are members of the SkyTeam alliance.

Kellner is quoted by the paper as saying he will "act aggressively" to ensure the company does not lose ground to rivals that merge.

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