United hints at renewed merger talks

The head of United Airlines has hinted at the possibility of renewing merger talks with Continental Airlines, according to a report in the UKÔÇÖs Financial Times.  According to the paper, Glenn Tilton, chairman and CEO of Chicago-based United, said that the market seemed to be in favor of rival DeltaÔÇÖs takeover of Northwest.  Delta merged with Northwest in 2008, creating a group with a market capitalization of $9.5 billion, compared with a combined market value of just below $5.5 billion for United and Continental.  Previous merger talks between United and Houston-based Continental ended in 2008 due to soaring fuel costs and plummeting cash reserves.  Tilton, who is known to be an advocate of airline consolidation, played down the prospect of an immediate renewal of talks with Continental; however, he did observe that investors seemed to be in favor of ÔÇ£scope and scaleÔÇØ in global business.  Tilton regularly speaks out against the international legal barriers preventing global airline consolidation that do not apply to other industries.  He argues that the airline industry is held back financially, since carriers are not able to benefit from cross-border capital flows and are held back from expanding the reach of their businesses.  Continental is known to be content as an independent player; but its president Jeff Smisek has said he would review that position if the Delta takeover results in greater competition and higher earnings.  Continental and United are already partners of sorts. Following the breakdown of the 2008 talks, Continental left the SkyTeam alliance headed by Delta and Air France to join United in the rival Star Alliance.  With a fleet size of over 350 aircraft, United flies to over 1,000 destinations in over 170 countries worldwide. It had revenues in 2008 of over $20 billion.  Continental, the fourth-largest airline in the US, serves 130 domestic and 132 international destinations. It had 42,210 employees as of December 2009.  According to the FT, Tilton also said he believed there would be another big airline merger within the next two years but declined to elaborate.