=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SFGate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/c/a/2007/11/15/BUU7TCGPE.= DTL --------------------------------------------------------------------- Thursday, November 15, 2007 (SF Chronicle) Delta, United deny merger talks George Raine, Chronicle Staff Writer Delta Air Lines and United Airlines threw cold water on a news report Wednesday that the two are engaged in merger talks, although Delta said its board has established a committee to analyze "strategic options," including potential consolidation. The Associated Press reported Wednesday morning that merger talks between the two are under way and said "there is a sense of urgency" to them. The AP quoted an unidentified source who said, "They want to get something done before a new administration gets in and so they get the clock ticking on" federal regulatory approval. Delta replied in a statement, "There have been no talks with United regarding any type of consolidation transaction and there are no such ongoing discussions." United spokeswoman Jean Medina said, "We do not respond to wholly inaccurate statements made by people who claim to have knowledge when they clearly do not." The news report did push up shares of the airlines Wednesday, but they fell after the carriers' denials. Both Richard Anderson, the chief executive of Delta, and Glenn Tilton, t= he CEO of United, are advocates of airline consolidation, and it has long been expected in the industry that there will be more mergers. In that vein - but separate from the AP report - a hedge fund that holds= 7 million shares of Delta Air Lines stock has urged management to enter into a merger transaction with another carrier, and it said the best choice would be United. World's largest airline? In a letter Tuesday, Pardus Capital Management President and CEO Karim Samii and Shane Larson, a principal, wrote Delta management that they "believe it is imperative that you seek to enter into a merger transaction with another carrier given the rapid rise in fuel prices and the increased risk to the business as a stand-alone entity." A United-Delta union would create the world's largest airline. The hedge fund noted that United has an impressive Pacific presence, San Francisco and Los Angeles hubs and slots at London's Heathrow Airport, while Delta has European routes and its Atlanta base is a starting point for Latin American flights. United Airlines is the major carrier at San Francisco International Airport. It also has a maintenance base at the airport, with 3,000 employees. They do heavy maintenance not only on United's fleet of airplanes but on those of at least 140 other airlines. Pardus said it had consulted with Gordon Bethune, the former chief executive of Continental Airlines, and with the airline consulting firm Simat, Helliesen & Eichner. Pardus, based in New York, said the firm conservatively estimated $585 million in savings in a Delta-United consolidation. Henry Harteveldt, an airline industry analyst at Forrester Research in S= an Francisco, agreed that the combination of routes is potentially attractive, although there are thorny issues - notably putting together Delta workers who still have pensions with United Airlines workers who lost theirs in the course of bankruptcy proceedings. 'Product, people and culture' "The benefits of a merger are often never as great as anyone expects them to be on paper," said Harteveldt. "Too often they look at elements of route network and do not consider the important things like product, people and culture," he said. "But United Airlines' Tilton has been very vocal about the need for airline industry consolidation," Harteveldt said. "He's just short of setting up a lemonade stand saying, 'Please buy my airline.' " Medina, the spokeswoman at United, said, "We make decisions in the best interest of United, and we don't comment on the opinion of one shareholder, or the actions of hypothetical transactions proposed by others." Delta said it had established a committee to explore options. It is head= ed by Daniel Carp, Delta's nonexecutive chairman of the board. "We appreciate receiving Pardus' views on the best course for Delta's future," said CEO Anderson. "We have been consistent in our public statements that Delta believes that the right consolidation transaction could generate significant value for our shareholders and employees, and that strategic options should be evaluated. With oil at over $90 a barrel, this analysis takes on a heightened importance as we factor those prices into our long-term planning process." Delta shares Wednesday rose 77 cents to $19.52 on the New York Stock Exchange, while shares of UAL Corp., parent of United, rose 67 cents to $44.17 on the Nasdaq Stock Market. E-mail George Raine at graine@xxxxxxxxxxxxxxxx -------------------------= --------------------------------------------- Copyright 2007 SF Chronicle <<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> If you wish to unsubscribe from the AIRLINE List, please send an E-mail to: "listserv@xxxxxxxxxxxxxxxxx". Within the body of the text, only write the following:"SIGNOFF AIRLINE".