United, US Airways Call Off Merger Talks
CHARLOTTE, N.C. -- In the end, the two airlines most eager for a deal simply couldn't make one.
Rather than proceed with a merger,
US Airways
(LCC)
and
UAL
(UAUA)
, the parent of United, have suspended talks.
In separate letters to their employees on Friday morning, US Airways CEO Doug Parker and UAL chief Glenn Tilton both wrote that their carriers will not pursue a transaction "at this time."
Shares of UAL were up 1.4%, while US Airways was down 2.8%.
"After much work and many conversations with other airlines, we have come to the conclusion that consolidation involving US Airways will not occur at this time," wrote Parker.
"This is not to say that something won't occur in the future -- as you know I strongly believe that consolidation is required in our industry and that US Airways would benefit from participating," he continued. "Rather it is simply unlikely that anything will happen in 2008 as our industry continues to struggle with how to function in a world with $130/bbl oil prices."
During the past two years, Parker and Tilton have been the primary advocates for consolidation in the airline sector.
Meanwhile, Tilton wrote that: "After a considered review by our board of directors, United has determined that it will not be pursuing a merger at this time due to issues that could significantly dilute benefits from a transaction. We are evaluating other options, and will do what is right for United."
The end of the US Airways talks with United means the current round of airline consolidation, which followed a series of bankruptcies, resulted in two deals.
Delta
(DAL) - Get Report
and
Northwest
(NWA)
made one, which now awaits regulatory approval.
In addition, in a 2005 deal, Parker presided over the merger of US Airways with America West.
The widely expected scenario had been that after Delta and Northwest announced merger plans last month,
Continental
(CAL) - Get Report
and United would follow. But last month, Continental spurned United. Then United turned to plan B, a deal with US Airways, but couldn't work things out. Now, published reports say, United may pursue an alliance with Continental.