Updated from 8:51 a.m. EST
For the airline industry, consolidation appears to have finally arrived.
, the nation's fifth-largest carrier, and
, the parent of United, the second-biggest, have held talks about merging their operations, according to published reports.
The two sides have had what were said to be exploratory discussions on a merger for the last few months,
The Wall Street Journal
The New York Times
The interest in getting a deal done has been stepped up since
offered in November to buy bankrupt Atlanta-based carrier
in an $8 billion transaction.
That combination, if completed, would create the biggest airline in the world, but Delta thus far hasn't been a friendly target.
Meanwhile, low-fare carrier
said Wednesday that it wants to acquire regional airline
Midwest Air Group
for $11.25 a share in cash and stock, placing a value of $290 million on the equity.
Midwest's board has said it isn't interested, but AirTran
plans to pursue the deal anyway.
Investors and industry watchers have known for some time that change would eventually come to the airline sector, but the questions were when and in what form. Airlines have always been competitive, but in the past five years the fight for supremacy, if not survival, has been especially fierce.
Following the terror attacks of Sept. 11, 2001, the airline sector went into a downward spiral and lost tens of billions of dollars, its plight magnified by soaring fuel prices and tremendous competition on ticket prices.
In the past five years, four major U.S. carriers have filed Chapter 11 --
, Delta, United and the old US Airways on two separate occasions. Just last week, Northwest hired an adviser to aid it in considering its own opportunities for a merger.
Currently, the largest airline in the world is American, a unit of
. Tom Horton, the company's chief financial officer, said in a recent interview that while airline mergers are "fraught with difficulty," they could
nevertheless alter the make-up of the group.
While he didn't go into specifics regarding his own company's plans, Horton did say, "You can't ignore what's going on in the industry and how it may be reshaped by consolidation. So we look at that and give it a lot of thought."
United CEO Glenn Tilton has publicly spoken in favor of shrinking the number of airlines, and reports emerged in September that the carrier had hired an adviser to help it examine its options, including a possible merger. At the time, United was thought to have expressed interest in a deal to both Continental and Delta.
Earlier this year, sources told
that United had reached out to Continental about a potential combination.
These sources thought a likely scenario, if such an arrangement were to be struck, would be an airline run by Continental's management, resembling the 2005 takeover of US Airways by the much-smaller America West Airlines.