United, US Airways merger talks slow: sources

NEW YORK (Reuters) - Merger talks between United Airlines and US Airways Group Inc have slowed and a deal is not expected in time for review by the Bush administration, sources said late on Tuesday.

The sources told Reuters the talks have not ended, but that United, which is owned by UAL Corp, is continuing its alliance talks with Continental Airlines Inc.

Both United and US Airways declined to comment.

In a report on its web site, the New York Times cited unnamed people with knowledge of the discussions, saying the talks might be revived at some point but that in recent days there had been little to no contact between the companies.

Citing one person involved in the talks, the newspaper said that internal teams of senior executives at both companies and external bankers and lawyers involved in the project, had put it on "permanent hold."

Even as its talks with US Airways were continuing, United had begun talks with Continental for a possible alliance, sources briefed on the matter told Reuters earlier this month.

Continental, which called off merger talks with United in late April, is also in advanced alliance talks with American Airlines AMR Corp and British Airways Plc, sources have previously told Reuters.

The wave of talks come after Delta Air Lines Inc and Northwest Airlines Corp 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.

After racking up $35 billion in losses and finally emerging from a 5-year slump in 2006, U.S. airlines are hoping mergers could give them greater market power to reduce flights and raise fares.

The airlines also face a renewed sense of urgency to cut costs as jet fuel prices have more than doubled since the start of last year.

(Reporting by Jui Chakravorty Das and Sinead Carew; Editing by Anshuman Daga)