Could Come Next Week; United, CO Talks Speed Up

Oh, what twisted webs the airlines weave... and we're just not talking about departure schedules at JFK. The Wall Street Journal reports the formal announcement of a merger between Delta Air Lines and Northwest Airlines could come sometime next week... while executives at United Airlines, apparently all-but shut out of a merger with Delta, appear to be stepping up preliminary talks for a union with Continental Airlines.

Reports of a breakdown in talks between Delta and NWA appear unfounded, as people close to the talks tell the WSJ disagreements were resolved earlier this week, over whether Northwest CEO Doug Steenland and his management team would be given top management roles in the merged carrier.

However, several key issues remain unresolved... and both sides still stress it all could be for naught, if either side balks over the realities of a merger. There is a chance, albeit a slim one, Delta CEO Richard Anderson could recommend to the board the airline remain independent.

As ANN reported, Delta executives were given approval by the board to initiate merger talks with both Northwest and United in January. It soon became evident Northwest was the favored party in those talks, and in recent weeks discussions of a Delta merger have all-but ignored reference to the Chicago-based airline, though exploratory talks between the two sides are still technically underway.

A person familiar with the situation says United since moved on to talks with Continental. The two parties reportedly want to announce their own merger close to the time Delta and Northwest announce a deal, so both combinations could undergo regulatory scrutiny at the same time, ahead of the November presidential elections.

In this scenario, there's another reason Continental wants a Delta/NWA announcement to happen... as Northwest holds a so-called "golden share" in Continental, allowing the Eagan, MN-based airline to block any potential merger with another airline.

If Northwest agrees to enter talks with Delta (or any other airline,) however, Continental may buy out Northwest's interest for the grand total of $100, regardless of whether Northwest goes through with its own merger plans. That would then free Continental to entertain whatever merger options come its way.

Continental CEO Larry Kellner recently stated he would prefer his airline remain independent... but would also do what's best for his airline, in the face of what many believe is an imminent downturn in the US economy. The carrier has rebuffed United's advances once before.

Of course, any merger announcements would be just the beginning... as in addition to passing anti-trust muster with the Justice Department and DOT, potential merger candidates would also have to reconcile their decision with their respective labor groups, and other code-sharing partners.

Stay tuned. It looks like the month of February should be an interesting one, to say the least.

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