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US Airways Says Merger Talks End With UAL’s United

Checking in at US Airways
Nicole Wolf checks in at a US Airways kiosk at O'Hare International Airport in Chicago on April 8, 2010. Photographer: Tim Boyle/Bloomberg

April 22 (Bloomberg) -- US Airways Group Inc. ended merger talks with UAL Corp.’s United Airlines, a sign that discussions may be intensifying on a tie-up between United and Continental Airlines Inc.

US Airways announced the pullout from the conversations today in a statement. United put talks with Tempe, Arizona-based US Airways on hold while sharing financial information with Continental, people familiar with the matter said on April 18.

The decision by US Airways probably indicates that discussions are progressing on a United-Continental merger, said Hunter Keay, an analyst at Stifel Nicolaus & Co. in Baltimore, who recommends buying UAL and Continental and doesn’t cover US Airways. A tie-up would create the world’s largest airline.

“This likely takes a bidding war off the table,” Keay said today. US Airways’ withdrawal “likely clears the path for the right merger at the right time,” he said.

US Airways’ pullout came two weeks after the disclosure that talks were under way with Chicago-based United. The two carriers held discussions in 2008 and abandoned a merger agreement in 2001 after U.S. regulators objected to the plan.

Continental’s View

Continental Chief Executive Officer Jeff Smisek told analysts on a conference call today: “We are examining Continental’s options and will take whatever action we believe to be in the best interest of our stockholders, customers, employees and the communities we serve.”

Executives at Houston-based Continental won’t comment further on merger speculation, he said. Valerie Wunder, a spokeswoman for US Airways, said the company isn’t commenting beyond its statement.

“Because of the persistent rumors about a possible transaction with United Airlines we believe it is appropriate to clarify the status of those negotiations,” US Airways said. “Our board has decided to discontinue those discussions.”

United confirmed that the discussions with US Airways have ended. “We have long said that we believe this industry would benefit from consolidation and we thoughtfully consider opportunities,” said Jean Medina, a spokeswoman, who declined to comment on any negotiations with Continental.

Airline shares pared declines after US Airways issued its statement. UAL fell 29 cents, or 1.4 percent, to $21.14 at 11:48 a.m. in Nasdaq Stock Market trading. Continental slid 20 cents to $21.26 on the New York Stock Exchange and US Airways dropped 29 cents, or 4.3 percent, to $6.47.

To contact the reporters on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net; Mary Schlangenstein in Dallas at maryc.s@bloomberg.net.

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net.

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