UAL in talks with Continental to form world's largest carrier

Chicago: US Airways Group Inc has said it is no longer in talks with United Airlines (UAL) for a possible merger. Industry experts now surmise that the announcement could clear the deck for a possible merger of UAL and Continental Airlines to form what would be the world's largest airline.

Spokespersons for UAL and Continental declined to comment.

A merger of UAL and Continental would result in an airline larger than Delta Air Lines Inc, which has occupied the top slot ever since it bought Northwest two years ago.

Continental and United came close to a merger in 2008 but failed to consummate a union as concerns arose about UAL's financial strength, which has since been vastly improved.

Industry experts say integrating Continental and UAL is a more sensible proposition as both carriers have more compatible route structures and labour forces. Such a combination, they say, could go a long way towards stabilizing an embattled airline industry.

The airline industry is currently struggling to recover from a two year long global economic downturn, high fuel costs and weak passenger demand.

More immediately, airlines are now grappling with a fresh crisis resulting from a volcanic eruption in Iceland which has left a backlog of millions of passengers stranded around the globe as flight were cancelled en masse on the European Continent.

The International Air Transport Association (IATA) said the crisis may well have cost airlines revenues of more than $1.7 billion by Tuesday this week.