United-US Airways merger talks suspended

By Jui Chakravorty Das

NEW YORK (Reuters) - United Airlines and US Airways (LCC.N) have suspended merger talks due to concerns about labour opposition and integration costs, while United draws closer to an alliance with Continental Airlines, a source close to the talks said late on Thursday.

United Airlines Chief Executive Officer Glenn Tilton told his counterpart at US Airways, Doug Parker, at a meeting on Thursday that it was best not to pursue a merger at the moment. But he left open future possibilities between the airlines, the source said.

Both United and US Airways declined to comment.

The two carriers have been in talks about a possible merger for a few months, while United was also in talks with Continental Airlines (CAL.N) for a full merger.

But United's merger talks with US Airways picked up steam in late April, after Continental called off full-merger talks with United.

The wave of talks come after Delta Air Lines Inc (DAL.N) and Northwest Airlines Corp NWA.N said in April they planned to merge and become the world's largest airline, seeking to counter skyrocketing fuel prices, a weak economy and growing competition from European carriers as trade barriers fall on trans-Atlantic travel.

After racking up $35 billion (17.7 billion pounds) in losses and finally emerging from a 5-year slump in 2006, U.S. airlines are hoping mergers or alliances could give them greater market power to reduce flights and raise fares.

The airlines also face a renewed sense of urgency to cut costs as jet fuel prices have more than doubled since the start of last year.