Talks Continue As Airline Also Courts US Airways

Numerous news reports citing unidentified sources close to the talks insist United Airlines is still in talks with US Airways about a merger. But it appears United may be hedging that bet.

The Associated Press cites anonymous sources in a new report that says United is in discussions with Continental Airlines about forming an alliance to gain some benefits of working together without going through a merger. As ANN reported, Continental rejected a straight-up merger with United last month.

AP's source was described as a person not authorized to speak on the matter, but was quoted as saying United would pursue either a merger with US Airways or an alliance with Continental, but not both.

United is still pushing ahead with negotiations aimed at a combination with US Airways Group Inc. but would not pursue both deals, said the person, who was not authorized to speak about the matter and requested anonymity. That source added a UAL Corp board meeting scheduled for Thursday was not expected to include a vote on which course to take.

United, Continental and US Airways have all declined official comment on a merger or alliance involving United... but last month, British Airways publicly confirmed talks of adding Continental to its existing marketing alliance with American Airlines.

Independent airline consultant Bob Mann played down the odds of United joining an alliance with Continental. "The United guys are very much heading in the direction of something that will really allow them to downsize the airline. We're talking about large capacity cuts. ... The alliance doesn't get to the point where you can really do the capacity-cutting."

Combining United and US Airways would create a carrier big enough to give a merged Delta-Northwest a run for the title of world's largest airline.

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