United Airlines

has furthered its quest for a partner,

hiring Goldman Sachs to explore strategic options including a merger.

Crain's

Chicago Business

said the investment bank is expected to assist United assess the value of its domestic and international holdings, advise it on sales or purchases of domestic or international routes, and scout for mergers.

Shares of United's parent,

UAL Corp.

(UAUA)

, were trading at $28 on Monday, up 18 cents, or 0.7%. The shares have fallen nearly 30% since they began trading at $40 after the airline emerged from bankruptcy protection in February. During the same period, the Amex Airline Index has been flat.

United CEO Glenn Tilton has long been a public advocate of airline consolidation but has offered few specifics beyond noting that United is interested. United has apparently conveyed that interest to both

Continental Airlines

(CAL) - Get Report

and

Delta Air Lines

(DALRQ)

.

When

US Airways

(LCC)

CEO Doug Parker contacted Delta last month to express his interest in a merger, US Airways said the call was prompted by reports that other airlines had contacted Delta earlier, though it has not specified the airlines.

United apparently contacted Continental regarding the possibility of a merger, industry sources told

TheStreet.com

this spring. A likely scenario for a United-Continental merger would be a combined airline run by Continental's management, resembling the 2005 takeover of US Airways by the far-smaller America West Airlines that Parker headed.

Former Continental CEO Gordon Bethune recently discussed the possibility with the

Newark Star-Ledger

. "Continental would be the management team, obviously, because they've got the expertise and the track record investors would like and employees would bet on," Bethune told the newspaper.

Such a merger would combine compatible route systems, Bethune said. United has a strong hub in Chicago, a strong presence on the West Coast, access to London's Heathrow Airport and a strong Asian route system. Continental has strong hubs in Newark and Houston, the second-largest market share in Latin America and "the best European connections out of New York," Bethune said, adding: "You put these two companies together, it's called checkmate."

The Consolidation Road

The extent of merger speculation in the airline industry is at a relative high, partially because of the continuing bankruptcies of Delta and

Northwest Airlines

(NWACQ)

. US Air's Parker, who along with Tilton has been a vocal proponent of consolidation, said in July that he was obliged to consider a merger because bankruptcy provides an opportunity to shed airplane leases and other assets.

Parker has not contacted Northwest, however. Delta and Northwest both have said they are committed to emerging from bankruptcy next year as standalone airlines.

The barriers to airline mergers are high, primarily because such mergers rarely succeed. Mergers between Pan American World Airways and National Airlines in 1980, USAir and PSA in 1988 and USAir and Piedmont in 1989 and

American

(AMR)

and TWA in 2001 were all considered to be failures. The integration of cultures, workforces and fleets all provide huge stumbling blocks.

So far, the 2005 US Airways/America West deal appears to be an exception. Aviation consultant Robert Mann notes that a United/Continental deal could follow a similar template. "Continental has many of the same attributes as America West, in that they smart managers, a low-cost network structure and they know how to make things work," he says.

Additionally, the US Airways deal provided an opportunity for Bruce Lakefield, an executive from outside the airline industry who made needed changes at the airline, to step aside and let a relatively young industry veteran step in with his management team. Similarly, a United/Continental deal "could be the Glenn Tilton retirement program," Mann said.

During a 32-year-career at Chevron Corp., Tilton helped oversee the $35 billion merger between Texaco and Chevron in 2001. The Crain's

Chicago Business

article noted that hiring Goldman reunited Tilton with James Sprayregen, who was a trusted advisor and United's lead council during the airline's 38 months in bankruptcy. Sprayregen recently left his Chicago law firm to head Goldman's restructuring practice.

In a recent report, Cathay Financial analyst Susan Donofrio said two events could stimulate mergers later this year. One is that Delta and Northwest are finalizing their bankruptcy plans, while the other is that an Open Skies treaty could be approved, prompting global antitrust immunity applications and consolidations associated with them.

Donofrio said combination possibilities include Delta with Northwest, United with Continental, and

JetBlue

(JBLU) - Get Report

with

Frontier

(FRNT)

. Additionally, she said that

Alaska Airlines

(ALK) - Get Report

and US Airways are also potential merger partners for various carriers.