UAL Corp's United Airlines is in merger talks with US Airways in a deal that could create the second-largest carrier in the US, a source familiar with the matter said.
The discussions, aimed at cutting costs and competing with a combined Delta-Northwest, have been going on for 'a couple' of weeks, and could fizzle or lead to talks with other carriers, the source said.
This would not be the first time the two airlines have tried to merge: in 2000, they announced a $4.3 billion deal that fell apart on opposition from unions and the Department of Justice.
In 2008, sources had said that US Airways was in parallel talks with United and Continental Airlines about a possible merger, when Delta Air Lines was merging with Northwest to create the world's largest airline. The talks ended as United chose to pursue an alliance with Continental instead.
A deal between US Airways and United would create one of the world's largest airlines, but analysts are skeptical. The deal would lack support from the pilots union, a major force that has derailed mergers in the past.
Competition issues will also likely come up again: the two carriers would end up with a large number of hubs and extensive operations in the Washington area.
Many airline executives have called for consolidation, saying it is a necessity for the industry to return to profitability. The airline industry has lost $50 billion in the past 10 years, including $11 billion in 2009, according to the International Air Transport Association.
The industry has been struggling with high fuel prices and a pullback in consumer spending amid a weak economy.
The four largest US carriers are Delta, American Airlines, United and Continental.
