United calls off merger talks with U.S. Airways

United and U.S. Airways formally put an end to their merger talks yesterday, citing rising oil prices that are making it difficult for airlines across the board to be profitable.

Both airlines announced the end of talks in messages to their employees.

According to the Associated Press, United CEO Glenn Tilton said: “After a considered review by our board of directors, United has determined that it will not be pursuing a merger at this time due to issues that could significantly dilute benefits from a transaction. We are evaluating other options, and will do what is right for United.”

United “will take the additional steps to size the business appropriately, leverage our capacity discipline to pass on commodity costs to customers and accelerate development of new revenue sources,” Tilton added.

The merger would have formed the world’s largest airline, but industry experts say it would have almost certainly increased ticket prices and reduced travel routes as well.

United has not closed the door on forming an alliance with another airline, a move that offers many of the benefits of a merger but stops short of total consolidation. Right now, United and Continental are in alliance talks.