United Airlines looking for a merger: report

Pardus Capital Management, a New York-based hedge fund, which owns a stake in both UAL and Delta Air Lines (NYSE: - ) is pushing for a merger of the second and third largest U.S. carriers, according to recent media reports.

United and its parent UAL are in a real jam and a sale may be the best option for the airline, which is saddled with relatively high debt and wafer thin profit margins said the BusinessWeek report.

"They didn't push as hard in bankruptcy to transform the business model, and they've been playing catch-up ever since ... It's clear that Tilton (UAL's CEO Glenn Tilton) now believes a merger is the road home," airline industry consultant Stuart Klaskin said in the article.

United, along with many of its peers, filed for bankruptcy following the September 11 attacks in 2001. It emerged from bankruptcy in 2006.

The report contends that United's extended pause on fleet expansion is an indication that the company is eager for a deal.

"We have consistently said we are managing this company to create shareholder value and we make decisions with our board in the best interest of United and all our stakeholders," said Jean Medina a spokeswoman for United.

"We will participate in business opportunities on our own terms," she added.

Industry experts believe that a Delta deal with Northwest Airlines (NYSE: - ) is more likely than one with United, as the two companies belong to the same international alliance and have complimentary route structures, according to the report.

Representatives for Delta and Northwest were not immediately available for comment.

(Reporting by Euan Rocha, editing by Leslie Gevirtz)