The talk originated from an Associated Press story, which was the same source of rumors last November that United and Delta Air Lines Inc. had all but finalized a merger. When those rumors proved to be unfounded, many in the industry assumed they originated out of United or its bankers to try to put pressure on Delta to strike a deal.
Those same sources now believe that the United-Continental codeshare talk could be designed at least in part to push US Airways to agree to a deal on UAL's terms. Though Continental is in talks with United, AMR Corp.'s American Airlines Inc. and merger partners Delta and Northwest Airlines Corp. about potential alliances, most expect Continental -- which has already rejected overtures by United to merge -- to wait patiently to see how the industry landscape changes in the coming months before choosing an alliance partner.
A codeshare alliance seems unlikely to solve United's financial problems. The airline, which lost $537 million in the first quarter, is highly leveraged and is believed to be angling for a capital infusion from its foreign partners as part of a merger. It is unclear whether partners including Deutsche Lufthansa AG would be willing to invest if United forges only a codeshare, given the limited opportunities it would provide to cut costs and reduce flying compared to an actual deal.
The talk comes on the same day that UAL's board is scheduled to meet for an update on merger discussions. While management is not expected to ask board approval for any specific transaction, sources say the company would like to make a decision in the coming weeks in hopes of getting a potential deal reviewed by regulators prior to the November elections. - Lou Whiteman
See Associated Press story on United/Continental alliance talks
See TheDeal.com story on Delta/United talks
See TheDeal.com story on United's first quarter results
See Dealwatch: Airline consolidation
Talk Thursday that United Air Lines Inc. might forgo a merger with US Airways Group Inc. in favor of an alliance with Continental Airlines Inc. appear to have done little to sway opinion in the industry that the airline will soon be headed down the altar with US Air.
