Sources Say Discussions Never Advanced Past Preliminary Stages

It appears the proposed, shotgun, oil-and-water merger of United Airlines and US Airways has fallen apart, over concerns about how the two troubled airlines would combine their disparate workforces.

Citing the ever-popular unnamed sources, The New York Times reports there's been little to no contact between executives on both sides for the past several days, and that designated merger teams have placed the talks on "permanent hold."

It's possible the talks will be revived, those sources add... but it's an ominous sign the talks reportedly never advanced past preliminary stages.

As ANN reported, United approached US Airways only after its first merger choice, Continental Airlines, walked away from the table and expressed its desire to remain independent. Industry pundits speculated Continental was unwilling to take on the burden of sorting out United, and dealing with its many problems... including the carrier's fractious relationship between management and labor.

If there's one domestic airline in an even worse position in that regard than United, however, it would probably be US Airways... which continues to experience difficulties stemming from its own 2005 merger with America West.

To this day, US Airways has failed to reach agreements with most of its unions towards a common labor contract. Sources close to the United/US Airways talks say the complexity in putting together common labor deals between the two -- make that three -- airlines was a key sticking point against the deal going forward.

United's pilots -- no fans of the current management team at United, led by the almost universally-reviled CEO Glenn Tilton -- also came forward to oppose a merger with US Airways, calling such a pairing a "toxic stew" that would only make a bad situation that much worse.

Neither side would confirm merger talks have fallen apart... but then again, neither side ever confirmed they were going on in the first place. "We don't comment on rumors or speculation," said United spokeswoman Jean Medina, echoing similar sentiments expressed by US Airways spokesman Philip Gee.

While many felt a United/US Airways merger would prove to be a less-than-optimal pairing -- due to overlapping routes, and a resulting glut of hubs -- the alleged breakdown of those talks appears to leave the futures of both airlines even more uncertain. Both are struggling with high fuel prices, and a slumping US economy... as well as extremely low customer satisfaction scores.

The stock market appears to believe the breakdown in talks is a good thing, however... for United. Shares in that airline were up six cents in early trading Wednesday, while stock in US Airways fell nine cents.

FMI: www.united.com, www.usairways.com