Pre-Christmas merger fever grips US carriers as United and Continental talk, AirTran pushes for MidWest takeover

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US airline observers are set to witness a yuletide shopping spree as a further two merger deals look have been unearthed today, further pushing the move towards consolidation.

United Airlines and Continental Airlines are reportedly holding exploratory talks on a possible merger, discussions heightened by the recent US Airways move for Delta Air Lines.

Reports in both the Wall Street Journal and the Financial Times, citing people familiar with the matter, say United is pursuing exploratory merger talks with Continental.

The Wall Street Journal says United parent UAL and Continental have been engaged in exploratory talks on a business combination for some months, but that these talks have taken on new urgency since US Airways’ merger move for Delta.

These reports cite the current consolidation environment in the US as factors behind the talks – further evidenced by Air Tran’s proposal, disclosed today, to buy Midwest Air Group.

Both reports indicate, however, that no tie-up between Star Alliance’s United and SkyTeam’s Continental is imminent and that each carrier is keeping its options open, and studying alternatives. Neither carrier is yet commenting in response to the reports.

Meanwhile, AirTran Airways’ parent is proposing to take over Midwest Air Group which includes Wisconsin-based Midwest Airlines and Midwest Express.

AirTran has put forward a proposal to acquire the entire outstanding stock of the airline group for $11.25/share in cash and AirTran stock – valuing the transaction at around $290 million.

The company, which initially put forward its offer nearly two months ago, states that a tie-up would create a national low-fare carrier and generate $40 million in network savings, plus a further $20 million in reduced costs.

Florida-based AirTran Airways operates a fleet of some 120 Boeing 717 and 737-700 aircraft. Midwest Airlines is also a
717 operator and also has a number of Boeing MD-80s.