American Airlines: No Chance To Agree

Talks between United Airlines and US Airways appear to have fallen apart, marking the second time in a month that United failed to reach a deal with a rival airline and putting the future of industry consolidation in question, people with knowledge of the discussions said Tuesday night.

United's board, and its chief executive, Glenn Tilton, raised questions about the arrangement in the past few days, according to three people who were briefed on the decision-making but spoke on condition of anonymity.

There has been little to no contact between United Airlines and US Airways in recent days, and the internal teams of senior executives at both companies, as well as external bankers and lawyers assigned to the project, have put it on "permanent hold," one person involved in the talks said. While it remained possible the talks could be revived, people involved in the most recent discussions said they had never advanced to final negotiations.

The talks between United, the second-largest traditional carrier behind American, and US Airways, the sixth-largest carrier, did not make enough progress for the two sides to reach an agreement in time for a deal to win approval from the Bush administration. That would have needed to occur by about Memorial Day to allow time for regulatory scrutiny.

Industry analysts had predicted that soaring prices for jet fuel would push airlines into each others' arms. But so far, there has been just one big merger, the deal announced in April between Delta Air Lines and Northwest Airlines, and there have not been serious discussions between other airlines beyond marketing alliance talk.

The United-US Airways talks, which had been under way at a more-casual pace for months, revived in earnest at the end of April, after Continental Airlines decided not to pursue a deal with United. Houston-based Continental board members chose to withdraw from discussions on April 28, saying that it did not think an agreement was in Continental's best interests.

At that time, people with knowledge of the discussions said United and US Airways hoped to reach an agreement within a month, so it could be considered by the Justice Department before a new president takes office.