Nov. 3 (Bloomberg) -- Continental Airlines Inc. may look again at combining with UAL Corp.’s United Airlines in the event that Delta Air Lines Inc.’s takeover of Northwest Airlines Corp. succeeds, President Jeff Smisek said.

Continental will focus on its new membership in the United- led Star Alliance marketing group and is “very pleased” to remain independent, Smisek said today in a Bloomberg Television interview. Houston-based Continental, the fourth-biggest U.S. carrier, would reconsider the strategy should Delta’s purchase of Northwest result in higher earnings, he said.

“We are watching Delta to see whether Delta outperforms us financially,” Smisek said in Frankfurt. “To date they have not done so. They’ve gotten bigger, they’ve gotten more complex, but they haven’t gotten profitable.”

Continental ended merger talks with Chicago-based United in April 2008 and decided later in the year to switch to the Star Alliance from SkyTeam, which is jointly led by Atlanta-based Delta and Air France-KLM Group. Delta’s combination in October 2008 with Eagan, Minnesota-based Northwest created the world’s biggest airline by passenger traffic.

Kent Landers, a spokesman for Delta, declined to comment on Smisek’s remarks. Jean Medina, a spokeswoman for United, declined to comment specifically on a renewal of merger talks with Continental.

“We have long believed the industry will benefit from consolidation, particularly as the competitive landscape has been reset,” she said in an interview. “We’re focused on sustaining and building on the significant improvements we’ve made to our performance, and also strengthening our alliance as we did with the addition of Continental.”

Bigger Competitors

Delta has said it will begin realizing advantages from the combination next year as it meshes fleets and moves to a single technology system. The airline doesn’t expect to achieve its expected $2 billion in annual merger cost savings and added revenue until 2012.

Continental, which rose 26 cents, or 2.3 percent, to $11.58 at 4 p.m. in New York Stock Exchange composite trading, has declined 36 percent this year. Delta, which climbed 27 cents to $7.22, has fallen 37 percent in 2009.

A combination of Continental with United, the third-biggest U.S. airline, may be “inevitable” to compete against bigger rivals, Daniel McKenzie, an analyst at Next Generation Equity Research LLC, wrote yesterday in a report. Fort Worth, Texas- based AMR Corp.’s American Airlines is the second-largest U.S. carrier.

Any other combinations in the U.S. industry would create a “super competitor” that could block Continental from expanding its network along the U.S. West Coast, which may push Continental into an eventual tie-up with United, McKenzie wrote.

Recovery’s ‘Early Signs’

Smisek, who is taking over as Continental’s chief executive officer on Jan. 1, was in Frankfurt to promote his airline’s Star Alliance ties with Deutsche Lufthansa AG, Europe’s second- biggest carrier, which has its main hub in the German city. He reiterated an estimate when Continental joined the group last month that additional annual revenue will total $100 million.

Business travel, the main source of Continental’s earnings, has “stabilized at a low level,” and among the “early signs” of a recovery are an increase in seven- to 13-day advance bookings for premium-class seats, Smisek said. The company is trying to increase ticket prices to profitable levels, he added.

“Although, as an industry or as an individual carrier, we have attempted to raise fares, we’re currently selling our product below its costs, which is not a good business plan,” Smisek said.

Smisek declined to specify a timeframe for determining whether to look into a merger with United again, saying that it was “clearly the right decision when we made it” to drop the earlier plan.

“If we believed it was in the interests of our shareholders, our customers, our coworkers and the communities we serve to merge, then we would certainly look into it,” Smisek said.

To contact the reporter on this story: Michel Doermer in Frankfurt at mdoermer@bloomberg.net; Tom Lavell in Frankfurt at tlavell@bloomberg.net.

Last Updated: November 3, 2009 16:09 EST