Consolidation is no silver bullet for what ails the airline industry, but mergers are inevitable and the business would benefit from a smaller number of carriers, the chief executive of American Airlines parent AMR Corp said on Thursday.

Speaking at a media event in Los Angeles, Gerard Arpey declined to comment directly on news reports this week that United Airlines parent UAL Corp and US Airways Group are in merger talks.

I don't think necessarily that consolidation is the answer to all of the economic challenges that the industry faces, Arpey said.

I don't think that is the silver bullet for solving some of the industry's financial challenges, he said.

Neither UAL nor US Airways has confirmed media reports that they are in merger talks. A pairing of the two airlines would form the second largest U.S. airline.

There inevitably will be consolidation around the world in the airline industry, Arpey said.

The airline industry has been hammered in recent years by low-fare competition, volatile fuel prices and an economic downturn that drained travel demand.

Proponents of consolidation also say the industry is burdened by overcapacity.

Arpey said fewer carriers would be better for the industry, but he said American Airlines is competitive whether consolidation happens or not.

Irrespective of what may or may not happen vis-à-vis consolidation in the airline industry, I think our company is very well positioned, Arpey said.

We are not in any way threatened by any of the conversations that are rumored to be taking place in the industry, he said.

(Reporting by Dana Ford in Los Angeles; Writing by Kyle Peterson in Chicago; Editing by Carol Bishopric)

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