Results Could Put Yet Another Carrier In Play

A merger to stave off another merger? Senior managers at Delta Air Lines are reportedly engaged in talks with their counterparts at both United and Northwest, over a possible alliance with one of those airlines. This, to fend off an unwanted takeover bid by US Airways.

The Wall Street Journal reports Delta has engaged in talks with executives at Northwest over the past several weeks, regarding a possible merger or, at the very least, strengthened alliances between the two airlines. Officials at Delta have spoken with United management, as well, although not as frequently.

The Journal states Delta's apparent interest in merging with another carrier, particularly Northwest, is intending to show its creditors how unappealing a merger with US Airways would be.

"If this is really a merger discussion, it might be an effort to keep the US Air wolf from the door," said airline analyst Michael Boyd on a possible Delta/Northwest merger. "Operationally it's not too much better, but it's the lesser of two evils."

News of the talks comes one day after US Airways upped its original takeover bid for Delta, to $10.2 million. In a letter commenting on the increase Wednesday, Delta management stated they'd look over the new offer... but it doesn't address the fundamental problems Delta sees with a merger with US Airways.

"The revised proposal does not address significant concerns that have been raised about the initial US Airways proposal and, in fact, would increase the debt burden of the combined company by yet another $1 billion," the airline said.

Analysts say the fact Delta is in talks with both Northwest and United is significant for another reason... namely, it may indicate a possible merger offering for yet another carrier.

Here's how that scenario would play out. Let's assume Northwest and Delta enter into merger talks. That leaves United out in the cold, right? Not necessarily... as that would then free up United to make a possible play for Houston-based Continental Airlines.

Under a previous agreement, Northwest holds the right to block any deals between Continental and another airline... unless, that is, it's in the middle of a deal itself. Oh, and by the way... rumor has it United and Continental are already in talks.

For all the speculation, however, NONE of the players we've mentioned here are talking publicly about their plans.

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