The Western/Delta relationship was pretty chummy long before their merger. It was as if the merger was the long-term goal all along. Delta fed passengers into
SLC and
LAX to connect to Western flights not served by Delta. They shared terminals in both locations. To expand however, Western would have eventually had to start competing on routes served by Delta, and vice-versa. Both airlines saw that their opportunities were to expand into each other's territories. Merger was the way to make shareholders happy. I cannot see that Western ever had the idea to try and continue without the merger.
Western operated fairly efficiently at the time of the merger. A few years into deregulation in the 80's, Denver's Stapleton was a hub for Western, Frontier, United and Continental. Western wanted to get out that mess, saw the opportunity to build up its
SLC operations and turn it into their hub, and capitalized on marketing it as the "Fastest Hub in the West." This is one the steps that helped them make their operations more efficient and profitable. United and American were big money losers at the time of the merger, and did not have the capital for such an acquisition.
I do not think AirCal and PSA were real threats to Western. Western provided intra-California service for positioning only, not to compete, and PSA's attempts to serve Western cities outside of California was short-lived.
Among my most valued airline collectibles is an unopened bottle of Western Airlines champagne, vintage 1979.