US airline mergers still possible, says United boss

A failed bid by US Airways for bankrupt Delta Air Lines has not dimmed the outlook for airline mergers, according to the chief executive of United Airlines.

“Nothing has changed, as far as I am concerned in the context of the case for consolidation,” Glenn Tilton told reporters after a speech to a Federal Aviation Administration conference.

Some experts have forecast there would be less pressure on airlines to merge after US Airways failed in its hostile takeover attempt of larger Delta.

Tilton, who runs the second-largest US airline, has long been an outspoken advocate for consolidation in a fiercely competitive industry.

He said it remained possible that healthy carriers could still merge even though the last two airline consolidation bids involved at least one bankrupt company. The current US Airways is a combination of America West Airlines and the old US Airways.

US Airways CEO Doug Parker, who engineered the 2005 US Airways deal as chief executive of America West and attempted to buy Delta, said that consolidation is needed but unlikely as the industry mounts a recovery.

Tilton did not discuss any consolidation plans that United might have or make any forecast about who might attempt to merge next.

There has been some speculation that United and Continental Airlines might be interested in a deal, reported Reuters. Another possibility is that United might look at an overseas partner. Delta and Northwest Airlines both plan to leave Chapter 11 protection this year as stand alone companies.

The airline industry has shown signs of improvement in the last year.

The FAA forecast has that commercial carriers are on track to carry 1 billion passengers a year by 2015.

Washington Dulles, New York’s John F. Kennedy, Los Angeles international and Atlanta Hartsfield airports are expected to see significant growth in the coming years, the Transportation Department projected. United has hubs in Los Angeles and at Dulles.

But Tilton said in his speech that domestic network airlines are financially stable, but not yet healthy after major restructuring since 2002. United completed a three-year bankruptcy a year ago.

“While most US carriers are returning to some level of profitability, we are not yet earning our cost of capital and we are not in a position to make the level of investment undertaken by our international competitors,” he said.

Report by David Wilkening