United and Delta have been considering a possible merger according to the Associated Press (AP), which spoke to an anonymous airline source. The source said that talks thus far have pondered keeping the name United and using United's headquarters in Chicago, with Delta's Atlanta hub being use as an operational base.
Delta and United have denied the reports, but as the AP reports, Delta executives admitted earlier to contemplating consolidation with a another airline, and last year former Delta CEO Gerald Grinstein said he had been contacted by United about merging. AP reporter Harry R. Weber speculates that, given soaring fuel costs and other financial challenges, airline consolidation may be seen as a way to cut costs. Meanwhile, the Denver Post quotes United spokesperson Jean Medina as saying, "we have said for the last four years that we believe consolidation is necessary for the industry, and others independently are reaching the same conclusion."
United and Delta are the second and third largest airlines in the country, and combining the two would certainly create a huge worldwide network. A merger may help the airlines in the long run, but I think any consolidation would be a long and painful process, given both airlines' size and internal bureaucracy. Two major airlines that merged in 2005, US Airways and America West, are still struggling to integrate their work forces. And for consumers, the loss of competition between the two popular airlines will likely mean higher fares.