United CEO Tilton says major airlines "must" consolidate

By Ted A. Knutson

Washington, Feb.17 - The basic economic forces that led to the recently announced buyout of MCI, Inc. by Verizon Communications Inc. and the proposed merger of AT&T Corp. with SBC Communications Inc. should lead to a similar consolidation within aviation, Glenn Tilton, chairman, president and chief executive officer of UAL Corp. said Thursday at the JP Morgan 2005 Airline Conference.

"Just as telecom is plagued with overcapacity and commoditization, the airline industry must follow. The market has no space for six network hub-based carriers," Tilton said at the conference keynote address.

The leader of United Airlines' parent company called the airline industry brutally competitive and over-supplied with redundant costs waiting to be squeezed out.

Addressing skeptics in the audience, Tilton said past failures at airline consolidation should not stop new moves toward merging major carriers.

Earlier in the day, AMR Corp. chairman president and chief executive officer Gerard J. Arpey said he was doubtful there could be a wave of consolidation as in telecommunications because there are no potential acquirers strong enough to nurse along weak acquirees.

In addition to the major airlines, low cost carriers are facing financial pressures that should lead to mergers, America West Airlines, Inc. senior vice president and chief financial officer Derek Kerr told the gathering.

He said America West wants to be open to look at any merger opportunities.

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