UAL, parent of United Airlines, and US Airways have decided not to merge, the chief executives of the two carriers said Friday in separate messages to employees.
UAL's Glenn Tilton said his airline would not pursue a merger now due to "issues that could significantly dilute benefits from a transaction." US Airway's Doug Parker said he believes consolidation is needed in the industry but it is unlikely to happen in 2008.
UAL and US Airways had been in merger talks for months in hopes of creating a new airline that could better withstand the pressures of record high fuel costs.
Neither CEO said exactly why they decided not to merge but media reports have said opposition from labor unions and the costs of integration were key factors.
Tilton said UAL is evaluating other options and would take steps to "size the business appropriately, leverage our capacity discipline to pass on commodity costs to customers and accelerate development of new revenue sources."
Shares of UAL were down 3 percent, or 25 cents, at $8.14 on Nasdaq. Shares of US Airways were down 5.1 percent, or 22 cents, at $4.10 on the New York Stock Exchange.
The two carriers have been in talks about a possible merger for a few months, while United was also in talks with Continental Airlines for a full merger.
But United's merger talks with US Airways picked up steam in late April, after Continental called off full-merger talks with United.
The wave of talks come after Delta Air Lines and Northwest Airlines said in April they planned to merge and become the world's
largest airline, seeking to counter skyrocketing fuel prices, a weak economy and growing competition from European carriers as trade barriers fall on trans-Atlantic travel.