United, Continental in early talks: source

DETROIT (Reuters) - United Airlines and Continental Airlines Corp are in the "very initial stages" of merger talks, a source familiar with the matter said on Thursday.

A deal between Delta Air Lines Inc and Northwest Airlines Corp would speed up talks between United and Continental, the person also said.

The Wall Street Journal said on Thursday the carrier's talks with Northwest have picked up steam, adding that a deal could be announced as early as next week.

A Delta merger with Northwest would create the largest passenger airline in the world. Analysts had expected Continental and United to start negotiations of their own as Delta and Northwest drew closer to a deal.

But soaring fuel prices and a softening U.S. economy are threatening to stunt the fledgling recovery.