ACQUISITION talks between Continental Airlines and Delta Air Lines broke off without going beyond the exploratory stage, a Continental source indicated yesterday.

Continental chief executive Mr Gordon Bethune told employees on Friday: "I'm telling you tonight that, effective right now, we are not in any discussions, nor do we have a plan to have any discussions with anyone.

Delta Air Lines chief executive Mr Ron Allen had told Mr Bethune that Delta was not interested in pursuing the acquisition talks.

News that the two companies were involved in discussions emerged earlier this month.

A merger of Delta and Continental airlines would have resulted in the world's largest airline and could have spurred increased consolidation in the US airline industry, analysts said.

Delta, the third-ranking US carrier which returned to profit over the past two years, saw no incentive for a merger, according to the Wall Street Journal

The US airline industry is enjoying its best financial performance since it was deregulated in 1978 following a financial crisis within the industry from 1991 to 1993, as each company struggled to keep its market share.

Continental is a mid-sized company which has made a spectacular recovery from financial woes earlier this decade thanks to private investors who could pull out now the going is easier, analysts warn. Together, Continental and Delta would have taken a 25 per cent share of US passenger traffic, moving ahead of current number one United Airlines which holds a 21 per cent share.