Continental and United a possible merger scenario rumored

Although airline mergers are always percolating in the industry rumor mill, there has been a noticeable uptick in recent weeks as analysts talk about possible tie-ups. With the acquisition last year of Northwest Airlines by Delta Airlines looking like it should be a success, creating the world’s largest airline, and capacity still over-pacing demand, the airlines are likely looking closely at possible matches if consolidation becomes an attractive alternative.

The rumor mill right now is centered on three possible mergers. The first being a United and Continental marriage. The second tying up American and US Airways. And the third involving already merger-entwined Delta adding west coast operator Alaska Airlines.

One of the most plausible tie-ups is between United Airlines and Continental Airlines which just joined forces through code-sharing and frequent flier coordination with Continental jumping ship at SkyTeam and joining United’s global airline alliance – Star Alliance.

A United and Continental tie-up seems like a good match with United having very little strength in Latin America and no New York area hub operation – both very valuable with current global conditions. Continental would bring both to United through a Newark, New Jersey/New York City hub and a Houston hub that is central to a strong Latin America network. Likewise, United would give Continental strength in the west and mid-west as well as a greater Pacific presence.

There is speculation that talks are continuing between United and Continental that likely include merger possibilities. With both carriers in the Star Alliance now, a merger would be simpler than before. However, it is likely both airlines are still watching the fall out from the Delta and Northwest tie-up before making any true progress.

Back on the table for the rumor mills is an American and US Airways match. This is, perhaps, being talked about because Delta joined up with Northwest and if United couples with Continental, that leaves American with a smaller airline in the number three spot – a place it might not want to be.

But who would they merge with? That question leaves only one real possibility – US Airways. Although American doesn’t necessarily need another largely domestic carrier, US Airways would bring a couple things to American of value. The US Airways hub in Charlotte would be a great advantage to American. American Airlines has tried on a few occasions to launch a southeast hub airport in Raleigh/Durham or Nashville only to see those efforts fail, so an established Charlotte hub would be a plus.

Also, American has long wanted a greater northeast presence and US Airways is strong in that area featuring the much coveted Shuttle operation between Boston, New York LaGuardia and Washington Reagan National. There may not be anything behind the American & US Airways tie-up rumors, but US Airways CEO talks frequently about the need for additional consolidation, and American may see the need competitively if other tie-ups proceed.

Last on the merger list is what some say should have happened long ago – a Delta Airlines acquisition of Alaska Airlines. Alaska Airlines does enjoy an exclusive niche in the Pacific Northwest, but that alone may not be enough to sustain a carrier its size. Alaska continues to shrink and their viability seems like it could be threatened if the economy turns further downward.

The head of Alaska Airlines says they enjoy being a smaller carrier and would like to stay that way. Perhaps he says this in response to the rumors of a Delta Acquisition. But that type of message is usually provided for the sake of employee morale even up to the day before a merger is announced. But Delta might see Alaska as an attractive addition beyond their current code-share and frequent flier marriage because the Pacific Northwest would offer excellent connecting routes in Portland and Seattle for Delta Airlines growing Pacific presence with their new Northwest pacific routes.

As we watch these possible tie-ups it will be interesting to see just how it effects the traveling public. Likely tie-ups will further reduce capacity resulting in higher fares, but that hasn’t necessarily been the effect from Delta and Northwest. If anything does happen that looks like it could lead in the direction of an airline marriage, the Airline News Blog will keep you up to date.