United and US Airways renew merger talks

Two of the biggest airlines in the USÔÇöUnited Airlines and US AirwaysÔÇöare in talks over a possible merger, according to reports.  The companies are said to have been in discussions for two weeks, but as yet, no agreement has been reached. The talks were first reported in the New York Times. Chicago-based United is the third-largest airline in the US by traffic, and Tempe, Arizona-based US Airways is the sixth. A merger between the two companies would create the second-biggest airline in the US after Delta Air Lines, which merged with rival Northwest in 2008. The new carrier would combine United's strength on trans-Pacific flights and its five domestic hubs with US Airways' presence on the East Coast and its Phoenix hub. The CEOs of both companies have long been champions of consolidation among domestic carriers in order to cut capacity and allow fares to rise. There have been a number of recent tie-ups within the industry as airlines seek to fight higher fuel prices and the global recession. The sector is set to make a combined loss of $2.8 billion this year, with carriers in the US and Europe suffering the most. United and US Airways have attempted merger talks before, abandoning them in 2001 after unions protested and anti-trust regulators threatened to block a deal. And a further effort to merge two years ago ended when United decided to pursue a marketing alliance with Houston-based Continental Airlines instead. The two are now reaping some of the revenue benefits of a merger without the associated risks. Continental is widely regarded as a being a better strategic fit for United than US Airways, but the company nonetheless has decided to remain independent. However, current CEO Jeff Smisek has indicated he might change his mind about mergers if DeltaÔÇÖs size begins to overshadow the rest of the industry. Some analysts have speculated that all three airlinesÔÇöUnited, US and ContinentalÔÇöcould end up combining. Although both United and US Airways are expected to post losses in the first quarter, they are expected to be narrower than during the same period last year. Analysts are predicting a rebound in revenues within the sector, and both companies are reporting strong gains in recent months as travelers return to the skies and airlines benefit from having cut capacity. US Airways stock rose 26 percent in after-hours trading on word of the renewed talks. Both United and US Airways have declined to comment on the reports.