UAL, Continental Reportedly in Talks

A United-Continental pairing could face significant obstacles, since Northwest Airlines Corp. may be able to stop it under a 2000 agreement with Continental.

Analysts said a sweetened bid could sway Qantas' management to accept a buyout.

In its statement, Qantas said its "non-executive directors consider that the terms of the proposal are not acceptable" - a possible signal that not all Qantas executives are opposed to the deal.

"Without seeing the conditions, it is hard to see what those sticking points are, but I wouldn't read it as an outright rejection," said BT Funds Management's Troy Angus. "We think this is still just early stages. They haven't rejected the bid outright, they have just said that some of the terms are unacceptable."

While airlines have rebounded from the troughs they fell into just a few years ago, mainly by laying off workers and reducing operating costs, they still must battle the high cost of fuel. Many industry analysts and consultants believe consolidation would help in this environment, by enabling carriers to cut overlapping routes and reduce available seat capacity, making it easier to raise fares.

Others aren't so sure such combinations make sense, noting the industry's troubled history at getting cooperation from labor groups, not to mention the difficulties of bringing different fleets, maintenance schedules and cultures under one umbrella.

"You're dealing with a lot of emotion here that may not make sense in the light of day," Boyd said.

In early trading Wednesday, shares of UAL rose 5 percent to $45.46; Continental shares jumped 7 percent to $46.02; Midwest shares surged 21 percent to $11 and AirTran shares rose about 1 percent to $12.51.


AP Business Writer Dave Carpenter in Chicago contributed to this report.

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