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Airlines in early merger talks

Speculation about a fresh wave of consolidation in the American airline industry was reignited yesterday on reports that Delta Air Lines and Continental Airlines were in talks about a possible merger.

The two carriers were said to be continuing tentative merger talks that were instigated by Continental last summer. It was widely believed, however, that the contacts were still in the exploratory phase.

An eventual marriage of the companies would transform the aviation landscape in the US and send ripples through the industry world-wide. If combined, Delta, the third-largest US carrier, and Continental, number five, would emerge as the largest airline in the world.

There was no comment on the speculation from either carrier yesterday. However, Carla Villalon, spokeswoman for Continental, said the company would have no announcement concerning a possible merger until at least the "distant future".

There was a similar flurry of activity in the industry a year ago when it was revealed that USAir had effectively put itself up for sale and entered talks with United Airlines and American Airlines. Both sets of talks quickly fizzled, however.

There is some logic to a Delta-Continental tie-up. They have complimentary hub networks in the US and Continental would give Delta strength in the South, notably in Texas, and in New York.