UPDATE 2-Continental CEO: We're 'big threat' to Delta

* CEO says will watch "competitive dynamics" of industry

* Continental will "bulk up defensively" if needed

* "Premature" to gauge success of Delta merger

* Shares close up 4.85 pct after touching 12-month high (Adds analysts commentary on mergers, share move, background)

By Deepa Seetharaman

NEW YORK, March 9 (Reuters) - Continental Airlines' strength in Latin America and Asia, and its New York-area hub, pose a "big threat" to larger rival and former alliance partner Delta Air Lines, CEO Jeff Smisek said on Tuesday.

Continental, the world's fifth-largest airline, was part of Delta's SkyTeam alliance until last October, when it quit the airline network following Delta's acquisition of Northwest Airlines, which formed the world's largest carrier.

"In our prior alliance, we were partners with somebody who wanted to kill us," Smisek said. "And it was a lot like being married to a woman who wants to poison your food -- it's just generally not a good idea."

Alliances allow airlines to share pricing and flight information, as well as save on costs.

Smisek, speaking at a JPMorgan Chase conference, said Continental's switch to Star Alliance was helping to drive passenger traffic.

Continental is carrying 2.5 more passengers per seat in this alliance than it was as part of SkyTeam, he said.

Continental's operations in New York, Asia and Latin America are a looming threat to Delta's network, he added.

"We're a growing threat to them in the Pacific," he said.

"You watch the fight over JAL (Japan Airlines) and they were taking out their checkbook and spinning like drunken sailors."

Delta ultimately lost its bid to fold JAL into SkyTeam to AMR Corp's American Airlines.

MORE OPEN TO MERGERS

Continental's alliance switch also brought it closer to United Airlines parent UAL Corp, which is a founding member of the Star Alliance. The two talked extensively about merging until talks broke off two years ago.

"If we think it's in our best interest to bulk up defensively, we'll do so," Smisek said. "But I think it's premature to make that decision at this time."

Continental has said it would prefer to stay independent, rather than merge with another airline. Smisek said the airline would continue to watch "the competitive dynamics" of the industry in the wake of Delta's merger with Northwest.

He said the Delta deal had gone smoothly, although it was "premature" to gauge its success. Smisek, who became CEO on Jan. 1, noted that airline mergers were highly complex.

Smisek's remarks marked a shift in tone in Continental's approach to consolidation, said S&P analyst Jim Corridore.

"I've never heard Continental say anything other than 'we prefer to go at it alone,'" said Corridore, who has a "strong buy" rating on the airline's shares.

"This is the first I've heard them acknowledge that if they thought it was in their best interest, they would consider it."

Two other analysts said it was difficult to tell if the comments represented a shift in Continental's view on mergers.

Former CEO Larry Kellner "was a little bit more methodical," Morningstar analyst Basili Alukos said.

"Smisek tends to be more of a quick reactor, he makes quicker decisions. I guess it sounds different coming from someone else."

One candidate for a merger could be United Airlines.

At the Reuters Travel and Leisure Summit last month, the head of the Air Line Pilots Association, John Prater, said a merger between United and Continental would "make the most sense" given that the carriers have little route overlap.

"When we chose not to merge with United, it was a point-in-time decision," Smisek said at the JPMorgan event, adding that he voted against the merger.

"Candidly, it was the right decision," Smisek said. "That said -- that was a point-in-time decision."

(Reporting by Deepa Seetharaman; editing by Gunna Dickson and Ted Kerr)