US Air (LCC) Walks From United (UAUA) Talks As The Wheels Come Off

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Reports are that the heated merger talks between United (UAUA) and US Air (LCC) have gone away. Both airlines are probably still talking to AMR (AMR), Continental (CAL), and any other puddle-jumper with a single-engine plane that they can find.

The airline industry got another dose of electric-shock therapy yesterday when JetBlue (JBLU) said it would defer taking delivery of a number of new Airbus jets. If the airline doesn’t make it, the delivery could be dodged altogether.

Managements at United and US Air have probably decided that thousand of hours talking about mergers will not save them. With oil at $130, putting together two airlines is not unlike lashing two drowning men to a raft. Neither will be lonely, but both will still die.

The name of the game in the airline business now is cutting capacity and personnel. In a merger, that work of making a deal and going though the time-consuming effort of combining two companies could take months. No one in the industry has that kind of time. At least if a carrier goes it alone, it can make decision about how to bleed itself quickly.

There may be a certain genius in the AMR move to stay away from diving into complex merger conversations. Instead, it is simply closing its operations in certain cities, taking planes out of service, and firing thousands of poor souls into the teeth of a recession.

Mergers will not work as fast as unilateral chopping.

Douglas A. McIntyre