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A hedge fund with large stakes in both Delta Air Lines and United Airlines parent UAL Corp. is pushing for those companies to merge to deal with rising jet fuel costs. Pardus Capital Management, which according to SEC filings has 3 million shares of Delta and 5.6 million shares of UAL, sent a letter Tuesday to the airlines proposing a stock-for-stock combination between the two companies that would form the world's largest airline.

United is currently the No. 2 carrier, behind only AMR Corp. unit American Airlines, while Delta, which emerged from bankruptcy earlier this year is No. 3. Officials from United and Pardus were not immediately available for comment, but Delta issued a statement saying it is open to discussions of some form of combination, and that it was looking for the right deal even before the letter.

Who notes that Delta's CEO is open to industry consolidation, and that rising fuel costs will likely put even more pressure on discount airlines such as AirTran...
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