Delta begins United-Northwest merger talks: report

NEW YORK (Reuters) - Delta Air Lines Inc (DAL.N: Quote, Profile, Research, Stock Buzz) has started merger talks with Northwest Airlines Corp (NWA.N: Quote, Profile, Research, Stock Buzz) and United Airlines parent UAL Corp (UAUA.O: Quote, Profile, Research, Stock Buzz), and hopes to reach an agreement with one of them over the next two weeks, The Wall Street Journal reported on Tuesday.

The report, citing unnamed people familiar with the situation, said Delta's board gave Chief Executive Richard Anderson permission last Friday to hold talks with both carriers simultaneously.

Delta aims to present a preferred partner when Delta's board next meet in early February, with a deal announcement coming as early as mid-February, the paper reported.

Delta spokeswoman Betsy Talton, reiterating previous statements, said: "A special committee of the board is working with management to explore strategic options, including potential consolidation transactions. However we are not providing updates, while this process is ongoing."

UAL declined to comment. Northwest was not immediately available for comment.

The pending talks were originally reported by the Wall Street Journal last week. The companies have not commented.

The U.S. airline industry is battling to sustain its fledgling recovery, which is threatened by soaring fuel prices and a softening U.S. economy. Most major U.S. airlines are expected to post losses for the fourth quarter of 2007 after profits earlier in the year.

Mergers are seen as a way to stabilize the volatile and fragmented industry by allowing carriers to cut costs, reduce capacity and raise fares.

A Delta deal with either UAL or Northwest would likely be an all-stock transaction because of the need for the airlines to conserve cash in the face of market uncertainty.