Speculation on a wholesale consolidation of the US airline industry today reached fever pitch with reports that all but one of the top six international carriers are involved in merger talks.

Reports by the Wall Street Journal and JP Morgan analysts centre on the long-mooted merger of Delta Air Lines and Northwest Airlines, which many observers have said is inevitable in light of US Airways' bid for its Atlanta-based peer. However, United Airlines, which was promoting consolidation before it emerged from Chapter 11 bankruptcy protection in February 2006, is also said to be in separate talks with Continental Airlines and Northwest.

The reports come within hours of a new takeover offer by US Airways, which increases the value of its proposed Delta acquisition to $10.2 billion. Its first offer, which was worth about $8.5 billion, was recently rejected by Delta’s management and major creditors.

US Airways’ bid, however, has pushed Delta and Northwest (which are both operating under bankruptcy protection) into merger talks, according to JP Morgan and the WSJ. And in an article released this afternoon, the newspaper says management and financial advisors from both carriers have been meeting regularly for weeks, and as recently as the past few days.

The deal is being promoted as an alternative to US Airways’ proposed bid for the Delta, which today was increased to $10.2 billion from the roughly $8.5 billion offer recently rejected by the Atlanta-based major’s management and major creditors.

Neither Delta nor Northwest are commenting on the report. Both carriers have previously insisted that they intend to emerge from their respective bankruptcies as single standalone entities, although many industry observers have speculated that a Delta-Northwest deal is inevitable.

In its article, the WSJ, citing one source, says Delta’s creditors are seriously considering US Airways latest offer, but are also debating a “promising third option” that could see a merger with Northwest. However another unnamed source says Delta has been contacted by United Airlines, which emerged from its own Chapter 11 bankruptcy protection restructuring at the beginning of 2006.

The report also says United and Continental Airlines have discussed a possible merger.

Source: FlightGlobal.com