United-Continental talks pick up pace: source

By Jui Chakravorty Das

NEW YORK (Reuters) - Merger talks between United Airlines (UAUA.O) and Continental Airlines Inc (CAL.N) have picked up pace, but a deal still hinges on the outcome of discussions between Delta Air Lines (DAL.N) and Northwest Airlines Corp NWA.N, people briefed on the situation said on Friday.

Talks between Delta and Northwest are hurtling toward a deal, but a merger announcement is not expected this weekend, the sources told Reuters.

Pilots at both airlines are reviewing a proposal of what the merged company would look like. But a deal could be announced before the pilots' union approves the proposal if the workers take too long, one person said.

Continental Airlines Inc has also had exploratory talks with AMR Corp's (AMR.N) American Airlines, The Wall Street Journal said on its Web site late Friday.

Analysts have said a Delta merger with Northwest -- which would create the largest passenger airline in the world -- would trigger a series of consolidation talks as other large airlines would need to compete with merged carriers as well as with low-cost airlines.

Many airline experts, including leaders of top U.S. carriers, say mergers are needed to help stabilize the volatile industry, which finally emerged from a five-year slump in 2006 after racking up $35 billion in losses.

Combined carriers could lead to higher fares, at least in some markets, as they reduce flights and use their increased market power to raise prices.

UAL Chief Executive Glenn Tilton has been a proponent of airline consolidation for the past three years, saying the U.S. industry is too fragmented to compete effectively on a global level.