United Airlines parent UAL Corp. scrapped its latest attempt to combine with US Airways Group Inc. and create the world’s largest carrier, formally backing away Friday from a deal that probably would have resulted in fewer flights and higher ticket prices.
Now the question for United, US Airways and other U.S. airlines is how to get by and make money with oil prices near $130 a barrel.
The chief executives of the two airlines told their employees in separate messages that a combination was off “for now,” and US Airways’ Doug Parker indicated that it was unlikely for at least the rest of this year. They had spent months exploring a deal that would have enabled the carriers to shed costs -- probably by paring employees, eliminating competing flights and trimming overlapping operations in Washington, D.C., and parts of the West.
But the attempt was hamstrung by tightening credit markets and the airlines’ dimming financial outlook, which has dried up cash and made them less attractive to the banks that would have to provide capital.
Would-be passengers may benefit from more choices for the time being, but the airline industry’s accelerating deterioration is likely to continue.
“The more competition we have and the more pricing decisions by CEOs we have, the better for consumers,” said Tom Parsons, chief executive of BestFares.com, a travel website. “It’s still coming down to the bottom line, though: Can any one of these airlines survive in this era?”
United, the nation’s second-largest carrier, has been perhaps the strongest advocate for consolidation within the industry. But United CEO Glenn Tilton was unable to work out a deal with Continental Airlines Inc. after Delta Air Lines Inc. and Northwest Airlines Corp. agreed in April to pair up. Tilton told US Airways’ Parker on Thursday that he was walking away from a chance to hook up with the No. 7 carrier.
Shares of UAL rose 15 cents Friday to $8.54, while US Airways shed 36 cents to $3.96.