United Airlines on better route for merger

Time finally may be on United Airlines’ side as the carrier’s executives, staunch proponents of consolidation, again explore a merger.

The underlying financial dynamics of the airline industry have greatly improved since 2008, when Chicago-based United and other U.S. carriers last engaged in the aviation equivalent of speed-dating, analysts said.

And United has made itself a more attractive partner by cutting costs and paying greater attention to details such as its on-time performance.

UAL Corp.'s United is progressing in its talks with Tempe, Ariz.-based US Airways Group Inc. as they tackle potentially thorny issues, such as the structure of the management team, said a person with direct knowledge of the discussions. United and US Airways declined to comment.


Meanwhile, executives at Continental Airlines Inc., which analysts think would be the best fit for United, are studying the situation but haven’t decided whether to enter the fray, said a person close to the carrier. A Continental spokeswoman declined to comment.

Other airlines could further complicate the merger picture with competing deals. AMR Corp.'s American Airlines, the second-largest U.S. carrier, isn’t expected to sit idly by as United, which is No. 3, tries to form a deal that would eclipse it, sources said.

American Chief Executive Gerard Arpey, speaking Thursday at a meeting in Marina del Rey of CEOs of members of the Oneworld airline alliance, declined to comment on the latest bout of merger mania, other than to say he anticipated further consolidation in the global industry.

“But I don’t think it’s a silver bullet to solving some of the industry’s financial challenges,” he added. He said American was “not threatened in any way” by merger discussions underway.


Oneworld partners British Airways and Iberia said Thursday that they had hammered out terms of their merger, and analysts think other major U.S. carriers will follow them.

“It’s a good time to deal, particularly since you have traffic recovering and airline earnings are going to recover,” airline analyst Julius Maldutis said. “Stockholders are ecstatic.”

But there’s no guarantee that United will walk away from this round of talks with a merger partner because such transactions are complex and easily undermined.


Times staff writer Hugo Martín contributed to this report.