US Airways-United Airlines Merger Talks Go Nowhere

US Airways (LCC) confirmed Thursday it has been in merger talks with UAL (UAUA), parent of United Airlines -- but in the same breath it also said those talks are over.

The airline industry has been making bets on whether United, the third-largest carrier based on passenger traffic, would hook up with US Airways or rival Continental Airlines (CAL). Now it looks like it's down to one.

"We have recently held discussions with United Airlines regarding a possible combination between our two airlines. After an extensive review and careful consideration, our Board of Directors has decided to discontinue those discussions," US Airways CEO Doug Parker said in a statement. He noted that recent press reports about a merger prompted the airlines to clarify the status of deal talks.

Talks Amidst Upheaval

Such talks come as the industry is facing major upheaval. It's taking a beating as businesses and consumers pull back on travel plans amid a severe economic slowdown. Add to the carriers' woes all the grounded European flights resulting from a recent volcano eruption in Iceland that spewed volcanic ash across the continent.

"US Airways has long been a proponent for consolidation in our industry. As opportunities have arisen for our company to participate in consolidation, we have taken a close and careful look at our options, always with an eye on what is in the best interests of our shareholders, customers, employees and the communities we serve," Parker said.

Shares of US Airways was down over 4% to $6.44 in late morning trading, while United was up a slight 0.05% to $21.44.