United, US Airways May Give It Another Go

CHARLOTTE, N.C. -- Thanks to the process of elimination, now may be the time for the airlines that most want to merge to go ahead and find a deal, despite the high risk.

That likely means putting together United with US Airways (LCC Quote), whose leaders have been the two biggest advocates for industry consolidation over the past three years.

Those airlines tried to merge in 2000, but the arrangement fell apart. Now, it's on the front burner again, sources say, following the weekend collapse of talks between Continental (CAL Quote) and United.

A deal between Continental and United, a unit of UAL (UAUA Quote), was widely expected following a merger announcement by Delta (DAL Quote) and Northwest(NWA Quote) on April 14. However, Continental has now told its employees it will instead remain independent.

In 2001, the proposed US Airways and United merger fell apart primarily because United lost interest, apparently believing the price to be too steep. Subsequently, the Justice Department rejected the deal anyway.

Seven years later, the same proposal would still provide United with a Southeast hub and access to key Northeast airports, the domestic compliments its vast international network has always lacked.

The two carriers already code-share in 270 markets, and both are members of the Star Alliance, easing some merger logistics. And this time, the price would no doubt be less than the $11.6 billion that United agreed to pay when it first committed. The price with interest grew to $12.3 billion during the 14 months it took the Justice Department to reject it.