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The Honolulu Advertiser
Posted on: Friday, April 23, 2010

US Airways drops United merger talks

USA Today

Hawaii news photo - The Honolulu Advertiser

United's interest in a Continental merger apparently spurred US Airways to end its own talks with the U.S.' No. 3 carrier.

Associated Press file photo

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US Airways ended merger talks yesterday with United Airlines after learning that United prefers combining with Continental Airlines.

Doug Parker, US Airways' CEO, said in a terse statement: "After an extensive review and careful consideration, our board of directors has decided to discontinue those discussions."

A source close to the situation at US Airways said executives were upset with their counterparts at United, with whom they thought they were close to a deal.

"They feel like they were played by the folks at United," said the source, who isn't authorized to speak for the carrier and spoke on condition of anonymity.

US Airways spokesman Jim Olson dismissed that characterization, saying, "This was a business decision, not an emotional one."

United spokeswoman Jean Medina wouldn't discuss specific merger talks. However, she said, "We have long said that we believe this industry would benefit from consolidation, and we thoughtfully consider opportunities, based on what's in the best interest of our company."

Jeff Smisek, Continental's CEO, also would not talk about the situation.

A combination of United, the third-largest airline in the U.S., with No. 5 Continental would produce a carrier 10 percent larger in the number of passenger miles flown than Delta, currently the world's largest.

It would also widen the gap between US Airways and its bigger rivals. But CEO Parker, in a memo sent to US Airways workers yesterday, said "industry experts" suggesting that US Airways will be strategically harmed are "wrong."

"It is not necessary for us to be direct participants in a merger because the entire industry benefits when consolidation occurs," he said.

Continental and United came close to merging in 2008. Instead, they negotiated a deal that made Continental a member of the United-led Star global alliance, filling in what had been a weak spot in Star's global network, the huge and lucrative New York City market. Continental has a hub at Newark airport.