updated 5/27/2008 10:37:57 PM ET 2008-05-28T02:37:57

Consolidation talks between United Airlines and US Airways appear to have fallen apart, The New York Times reported late Tuesday, citing unnamed people with direct knowledge of the discussions.

The board of United parent UAL Corp., and its chief executive Glenn F. Tilton, raised questions about the arrangement in the past few days, according to three people the Times said had been briefed on the decision making. One person said senior executives at both airlines, as well as external bankers and lawyers working toward a deal, have put it on "permanent hold."

The Times said the people spoke on condition of anonymity because the talks were private.

United spokeswoman Jean Medina declined to comment to The Associated Press. "We don't comment on rumors or speculation," she said.

Messages seeking comment were left for US Airways representatives.

Labor complications
A key sticking point appeared to be labor complications, the Times reported. Sorting out issues such as union representation and seniority could have taken years, delaying any cost savings from a deal. US Airways Group Inc. has still not reached agreements with all of its unions following its 2005 combination with America West Airlines.

United and US Airways first agreed to team up eight years ago, but United called off the planned $4.3 billion acquisition in July 2001 after the Justice Department said it would sue to block it.

More recently, industry analysts have predicted a trend toward bigger but more efficient airlines as fuel prices have skyrocketed and carriers struggle to survive.

Chicago-based United and Tempe, Ariz.-based US Airways have been in preliminary talks for months, but the pace picked up last month after Delta Air Lines Inc.'s acquisition of Northwest Airlines Corp. was announced and Continental Airlines Inc. said it decided not to pursue a merger with United.

A combined United-US Airways would jockey with the newly proposed Delta-Northwest for bragging rights as the nation's largest carrier, dropping AMR Corp.'s American Airlines from first to third.

Combined, United and US Airways have about 91,000 employees, more than 800 airplanes and annual revenues of $31.8 billion.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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