By Kyle Peterson
WASHINGTON (Reuters) - Pressure on U.S. airlines to merge is mounting as soaring fuel costs and weakening domestic travel demand threaten to destabilize freshly restructured carriers, top airline executives said this week.
Airlines will have a hard time passing fuel expenses to customers through higher fares in a softening economy, senior executives of AMR Corp (AMR.N: Quote, Profile, Research, Stock Buzz), parent of American Airlines; UAL Corp (UAUA.O: Quote, Profile, Research, Stock Buzz), parent of United Airlines; Delta Air Lines (DAL.N: Quote, Profile, Research, Stock Buzz) and US Airways Group (LCC.N: Quote, Profile, Research, Stock Buzz) said at the Reuters Aerospace and Defense Summit.
Delta's Chief Financial Officer Edward Bastian said Delta remains confident in its future as a stand-alone company, but the current economic environment poses unforeseen threats that make the airline consider alternatives.
"The timing has certainly been accentuated by having oil at nearly $100 a barrel," Bastian said on Thursday. "That causes one to look harder at structural solutions."
Airline leaders see industry consolidation as a way to cut costs and capacity and lend stability to the volatile industry. A common view is that if two of the big airlines merge, others will scramble to find partners of their own.
The last merger of two major carriers was in 2005 between US Airways and America West. Early this year, Delta fought off a hostile bid from US Airways.
Speculation swirled last month that United and Delta were in talks. Delta denied the reports, but said it is considering strategic alternatives that could include consolidation.
The U.S. airline industry is recovering from a years-long downturn triggered in part by low-fare competition and exacerbated by soaring fuel prices. Continued...
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