UAL Corp's United Airlines and Continental Airlines Inc are discussing a possible merger as the industry moves toward finishing the consolidation begun after the 2001 terror attacks, two people familiar with the talks said, according to Bloomberg News.

The discussions follow US Airways Group Inc's hostile US$8.67 billion offer for Delta Air Lines Inc on November 15. European carriers also are working to acquire rivals to expand networks and gain pricing power.

A United-Continental merger would unite the second- and fourth-biggest United States-based airlines. It would create a carrier that would eclipse AMR Corp's American Airlines as the world's biggest as measured by passenger traffic.

"We don't need six legacy network carriers in this country," said Alan Sbarra of San Francisco-based Roach & Sbarra Consulting. "We're going to consolidate possibly down to three or four."

UAL Chief Executive Officer Glenn Tilton has championed mergers since February 2005. He hired Goldman Sachs Group Inc this year for advice on possible transactions. Continental CEO Lawrence Kellner has said he wants to remain independent.

The people who confirmed the talks asked not to be identified because the discussions are private.

AirTran Holdings Inc, a low-cost carrier based in Orlando, Florida, also is preparing an offer for Midwest Air Group Inc, the Wall Street Journal reported, quoting people close to the talks whom it didn't identify.

United's hub airports in Chicago, San Francisco and Washington would mesh with Continental's hubs in Houston, Cleveland and Newark, New Jersey. The combination also would combine Continental's strength in Latin America with United's Asia-Pacific routes and access to Heathrow Airport in London.

One possible complication in the United-Continental talks may be the so-called golden share acquired by Northwest Airlines Corp in 2001.

In settling a dispute over an alliance letting the two carriers sell seats on each other's planes, Northwest received the power, in some instances, to block a merger between Continental and another airline.

The United-Continental talks and US Airways' offer for bankrupt Delta may force AMR's American and Northwest to consider a tie-up, too, said David Swierenga, president of Vienna, Virginia-based Aero-Econ.

"Nobody wants to be left sitting on the sidelines in this," said Swierenga, a former chief economist of the Air Transport Association, the trade group for US airlines. Acquiring Northwest, which like Delta is in bankruptcy, would expand American's reach in Asia, Swierenga said.

The pace of acquisitions is accelerating as airlines, especially in the US, recover from a drop in travel after the September 11, 2001, terror attacks. Major US carriers lost more than US$40 billion from 2001 through 2005.