Airline mergers no longer look like a panacea for the industry. They do not solve the problem of higher fuel costs. They often drive the ire of unions which do not want to lose any more jobs. And, integration problems usually make customers mad, which can send them off to fly other carriers.
Perhaps because of some of these factors, United (NASDAQ: UAUA) and US Air (NYSE: LLC) are cooling talks about a tie-up. Or, it may be that each airline thinks it can find a better deal. "Even as its talks with US Airways were continuing, United had begun talks with Continental for a possible alliance," Reuters reports.
The most likely case is that managements at airlines are looking for ways to stay out of Chapter 11. Rising jet fuel prices and the potential of lower passenger traffic in a recession have executives working overtime to keep losses from piling up.
A merger does no good if neither party in the marriage is in good enough shape to add much to the deal.
Douglas A. McIntyre is an editor at 247wallst.com and author of Ten Stocks Under $10 letter.
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