United Airlines is holding preliminary talks to merge with Continental Airlines in a huge deal that would further reshape the struggling airline industry, people involved in the negotiations said tonight.
The discussions, though far from complete, recently picked up pace following US Airways’ bid last month to buy Delta Air Lines for about $8 billion, these people said.
US Airways’ proposal, promising $1.65 billion a year in savings by combining with Delta, has helped add urgency to carriers’ interests in merging.
A United spokeswoman, Jean Medina, and a Continental spokesman, David Messing, each declined to comment.
Any deal between the two airlines is far from imminent. Continental and United executives are watching the US Airways and Delta situation to see how it might play with antitrust regulators. Delta is expected to file its plan to exit bankruptcy proceedings next week, following a flurry of meetings scheduled for later this week among Delta creditors and others.
Analysts have long favored a combination of United’s Asian routes and heavy coverage of the Western United States with Continental’s Latin American and European routes and its large and highly profitable hub in Newark.
At today’s close of the stock market, Continental’s market capitalization was about $4 billion and United’s was about $5 billion.
United’s chief executive, Glenn Tilton, and Continental’s chief executive, Larry Kellner, have met in person to discuss a combination, a person with knowledge of the talks said. Today, however, Mr. Kellner was in Tel Aviv on business, Continental had informed its employees earlier this week.
Any effort by the two to merge would be complicated by an agreement Continental has with Northwest Airlines. The agreement could allow Northwest to block certain merger transactions involving Continental, but could allow Continental more freedom to enter into a combination if it was the acquiring party and approval of its shareholders was not required.
Also, if Northwest entered into a merger, it would lose its blocking power over Continental.
