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United and US Airways Said to Be in Merger Talks

UAL Corp., the parent of United Airlines, and US Airways are in talks to merge, in a potential deal that would create one of the world’s largest airlines, people briefed on the matter told DealBook on Wednesday.

Sources reached by CNBC also confirmed the deal.

The negotiations mark the latest efforts to consolidate the struggling airline industry. Both companies have been vocal in calling for greater consolidation within the industry to help prop up falling revenues, with United’s chief executive, Glenn F. Tilton, among the leading proponents for more mergers.

“The investor seems to have spoken,” Mr. Tilton told The Financial Times in February. “The market seems to have suggested that scope and scale in a global business are important.”

United and US Airways are deep in their merger discussions, though a transaction is not expected to be announced for at least several weeks, these people said, cautioning that talks may still collapse. One potential hurdle could be union opposition.

Terms of the deal could not be learned.

The two airlines have come close to merging several times over the past decade. In 2000, they announced a $4.3 billion deal, only to withdraw after fierce opposition from unions. They tried again in 2008, but ended talks after several months of negotiations.

Jean Medina, a United spokeswoman, and Andrew Christie, a US Airways spokesman, declined to comment.

The talks are being driven in large part by cost savings. Both sides have sought to lower costs, but believe they can achieve greater efficiencies together, these people said.

Previous talks were held up because of the complexity of putting together the various union contracts covering each airlines’ employees, as well as sorting out which union would represent workers and how to account for their seniority.

Airline executives and analysts have long predicted more consolidation in the ailing airline industry since the merger between Delta Air Lines and Northwest Airlines. Even as the economy improves, airlines have continued to add new surcharges like fees for checked-in bags in an effort to bolster sagging revenues.

United had also held merger talks with Continental Airlines in 2008. And US Airways pursued an unsolicited bid for Delta in late 2006, but withdrew after several months amid fierce opposition from Delta’s unions.