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Airlines Kept on Toes

Southwest and Continental might make moves if US Air does merge with Delta.

If there is going to be consolidation in the airline industry,

Continental Airlines

(CAL) - Get Caleres, Inc. Report


Southwest Airlines

(LUV) - Get Southwest Airlines Co. Report

say they want to play, too.

Southwest would look at both the Northeast shuttle service and Charlotte, where

US Airways


has a hub, "if the scenery were to change," spokeswoman Beth Harbin said Tuesday. Additionally, the carrier would be interested in adding gates at congested Philadelphia International Airport.

Continental CEO Larry Kellner told employees in a recorded message that "if the landscape of the U.S. airline industry does indeed change, we'll do what we need to do." Still, he noted that "if the industry stays as it is, our preference is to remain independent and continue our growth plan."

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The two airlines were responding to US Airways' announcement last week that it would pursue a hostile takeover of

Delta Air Lines


. Delta, which had resisted earlier overtures by US Airways, says it continues to have no interest.

Both carriers are now focused on winning over creditors, who largely control the future of Delta, which is reorganizing under bankruptcy court protection.

Southwest envisions the possibility of a day when Delta and US Airways might be required to divest assets to satisfy regulatory requirements, Harbin said. "The greatest overlap of these two companies is on the East Coast, and that is our least developed region, because it's really difficult to get in there," she said.

"There's no list," Harbin said, but New York's La Guardia and Charlotte are both places Southwest might choose to serve. Currently, Delta and US Airways both operate Northeast shuttles based at LaGuardia. US Airways CEO Doug Parker has said that one would be divested in a merger.

Delta and US Airways also operate the two primary Southeast hubs in Atlanta and Charlotte. Although gate space is available in Charlotte, competing with a US Airways hub in a relatively small local market has so far not been a course that Southwest has elected to pursue. But regulators might require more competition in Charlotte as a precondition to a merger.

In Philadelphia, a major market where US Airways also operates a hub, Southwest would like to expand but is constrained by a lack of gate space.

"The creation of a competitor even larger than

American Airlines

would not be good for us in the long run," Kellner said on his recorded message. However, he added that "there is no certainty that the proposed US Airways-Delta merger will ever occur. There are all sorts of hurdles, and we've seen offers before that did not end up happening."