DALLAS (AP) — The Delta-Northwest combination inching toward completion would create a new world leader, leapfrogging American Airlines and the Air France-KLM tandem in passenger traffic, but would also likely trigger a chain reaction of other deals, with unknown consequences for travellers.

The next potential deal in line — United and Continental — would be even bigger, and other pairings are likely too as carriers bulk up to compete in the new, more competitive global airline industry.

Executives at the big airlines believe that unless you have lots of planes flying at convenient times to many cities, valued corporate travellers won't remember you the next time they book a flight.

The economics of the airline industry also are driving carriers into each others' arms.

High fuel prices are causing many airlines to lose money, and the threat of recession makes the outlook even more grim. Airlines have raised fares, but not enough to offset fuel. Conventional wisdom holds that in mergers, airlines could reduce overlapping routes and raise prices.

Of the so-called legacy US airlines — those that existed before deregulation and operate hub-and-spoke route networks — Continental Airlines Inc. has been the most profitable since the industry downturn that began in 2001.

Continental's chief executive, Lawrence Kellner, says he would prefer to remain a stand-alone company but doesn't want to fall behind if others start merging.

"We do pay attention to relative size, and I think we would have some concern" if rivals merge, Kellner recently told analysts. He said he'll watch what competitors do, and "if we see something or hear something, we won't hesitate to act aggressively".

Northwest and Delta Air Lines Inc. have been talking about joining the two carriers, and people close to the talks say a deal could be announced as soon as next week.

In a memo to his employees on Wednesday, Northwest Airlines Corp. CEO Doug Steenland said "consolidation is highly likely at some point," and doing nothing "could be our worst alternative". "I do believe that consolidation is highly likely at some point — particularly with the high cost of fuel and the other challenges that the industry faces," he said.

If Delta Air Lines Inc., the nation's third-largest airline, combines with No. 5 Northwest Airlines Corp., it would create the largest US airline, passing United and the current leader, American Airlines.

But United, the second-largest, and No. 4 Continental could trump Delta by joining forces.

The history of airline mergers is mixed at best. It's a challenge to combine different aircraft fleets, labour unions and cultures.

"Mergers are always a problem, and that's why Continental is not in favour of one," says Raymond Neidl, an analyst for Calyon Securities. "They have always been expensive and sloppy."

Executives' public remarks have been vague — Continental's Kellner and United CEO Glenn Tilton have acknowledged only that their companies have examined how potential deals could affect them.

Tilton told employees this week, "The work we have done puts us in a strong position to participate in consolidation when the opportunity and the time is right for all of our stakeholders. No one will be making our decisions for us."

And what if Continental or United decide not to play musical chairs? What if, even in the face of a Delta-Northwest deal, they did nothing?

They might become takeover bait.

"Continental thinks they can survive on their own because of their strong hubs in the New York area and Houston and their international routes, but other airlines might be interested," said Neidl, the longtime industry analyst.

Even a Delta-Northwest curtain-raiser could draw competing offers — some analysts think American's parent, AMR Corp., might bid for Northwest. There is speculation that US Airways Group Inc. could bid for Continental or United, although it might need a partner who can bring cash to the table.