British Airways in Preliminary Merger Talks With KLM

A new wave of consolidation pressure in the airline business has spread to Europe as British Airways (BAB) held informal merger discussions with KLM Royal Dutch Airlines (KLM), The New York Times reported Monday.

Though executives told the paper that the discussions are in the most preliminary stage, the talks underscore a sense of urgency among airline operators to seek partners, in the hope of increasing profit in an industry where many companies, particularly in Europe, have seen margins erode.

The informal discussions take place amid the proposed acquisition of US Airways (U) by UAL (UAL), parent of United Airlines, for $4.3 billion and following overtures from AMR, (AMR), American Airlines' parent, to Northwest Airlines (NWAC) about combining their businesses. Those talks have adjourned, executives said. Northwest has made it clear that it would expect a high price, with the value of the UAL-US Airways deal as a starting point. AMR is said to be considering its next move.

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