United Has Merger Delusions

The second biggest airline is by far the most puzzling.

Alone among the 10 largest carriers, United(UAUA) has neither placed a major aircraft order recently nor expressed any interest in doing so. Instead, it seems singularly focused on finding a merger partner. The search has led nowhere -- not surprisingly, given that airline mergers rarely succeed.

Meanwhile, United's financial performance has been, to quote Winston Churchill, "a riddle, wrapped in a mystery, inside an enigma." Since it emerged from bankruptcy in February 2006, United has ridden a financial roller coaster. Its fortunes decline one minute, as they did in the first quarter, then rise the next, as they did last week.

Although it operates an imposing global route system at a time when international routes far outperform domestic ones, United sometimes appears to be floundering. "No analyst out there can figure out why they are not doing a better job," said aviation consultant Robert Mann. "This ought to be a gold mine."

Instead, United is viewed as having failed to get all it needed from a bankruptcy that consumed three years. By contrast, Delta(DAL) spent 20 months in bankruptcy, yet remade itself. And United is often compared to American(AMR), which has similar costs despite not entering bankruptcy at all.

United CEO Glenn Tilton came to the airline business with an outsider's perspective. Before joining United in 2002, he spent 32 years at Texaco, overseeing a 2001 merger with Chevron. Now, after less than four years in an insular industry staffed largely by lifers who are in love with it, he sometimes seems to tell airlines what to do.

To watch Brittany Umar's video take of this column, click here.