• The Wall Street Journal, Wednesday, April 16, 2008 10:10 AM

The merger announcement late Monday by Delta and Northwest signals to U.S. airlines that staying the course may no longer be sustainable when oil costs $113 a barrel, low-cost competitors are eating their lunch domestically and deep-pocketed overseas airlines are expanding quickly with new aircraft.

Both United Airlines parent UAL Corp. and AMR Corp.'s American Airlines could do deals that would quickly eclipse the proposed Delta-Northwest combination, which would be the world's biggest carrier. United, now the No. 2 carrier by traffic, has long coveted Continental Airlines. American, now No. 1, could make a counter-bid for Northwest or try to woo Continental.

Meanwhile, US Airways Group Inc. could become a more attractive takeover candidate for one of the larger players. The carrier and United have talked about a possible combination for over a month, according to a person familiar with the matter.

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