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The WSJ has confirmed that UAL Corp. (NASDAQ: UAUA) and US Airways Group Inc. (NYSE: LCC) have broken off merger talks. The CEOs of both companies have noted that they believe in consolidation, but $130 oil is making the companies look at other more attractive options.

Both companies have left the door open to mergers down the road, but for now talks are off.

What is perhaps most important here is the implication for the airline industry. JetBlue Airways Corporation (NYSE: JBLU) is also seeing shares under pressure since it just raised $175 million in convertible notes.

Perhaps if the airlines want to look at deals, perhaps they should buy small oil drillers and producers to cut out all the middlemen. But that's not likely to happen.

We're all going to be facing significantly higher airline ticket prices and more individual charges that will feel like nickel and dime strategies.

Unfortunately in the world of airline mergers, 1+1=1.

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

The airline industry got another dose of electric-shock therapy yesterday when JetBlue (NASDAQ: JBLU) said it would defer delivery on a number of new Airbus jets. Of course, if the airline doesn't make it, the delivery could be dodged altogether.

Managers 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 leaky raft. Neither will be lonely, but both will still die.

Continued at 24/7 Wall St.

The board and management of Continental Airlines (NYSE:CAL) have decided that staying single is the best way of life. After long merger talks with United (NASDAQ:UAUA), Continental has elected to go it alone.

Continental may still enter a "code sharing" alliance with one or more airlines so that customers can have common ticking across more than one carrier.

The decision is based on the premise that airline mergers created nightmarish customer service problems which drive fliers to the competition. It is a sound position and calls into question the wisdom of Delta's (NYSE:DAL) merger with Northwest (NYSE:NWA).

While industry marriages may allow for the cutting of some routes and personnel, they can lead to labor relations headaches including strikes by employees who are trying to keep their jobs. The hook-ups also do nothing to solve the more pressing problem at all airlines--rising fuel costs.

The rest of the story is at 24/7 Wall St.

Who would have imagined that the Delta (NYSE: DAL) merger with Northwest (NYSE: NWA), which was announced yesterday, could be scuttled by a merger of Continental (NYSE: CAL) and United (NASDAQ: UAUA)?

Most Wall St. observers believed that the unions were the largest barrier to the Delta deal. The pilots have not given the marriage their imprimatur. The captains may be able to hurt the merger by threatening a strike which could shut down the new carrier. Regulatory questions could be the other roadblock, but, as Reuters points out, "While the U.S. Justice Department is expected to work carefully, the agency's track record on consolidation favors approval."

If the airlines can solve their labor issues, the merger, meant to offset the rise in fuel prices and fall in passenger revenue, is likely to happen.

Read the rest of the story at 24/7 Wall St.

The revived merger between Delta (NYSE:DAL) and Northwest (NYSE:NWA) is based on the premise that, in a airline industry depression, two carriers mashed together work better than if they remained independent. It is an argument which is half again too clever but has no merit to speak of.

According to The Wall Street Journal "The deal could value Northwest at roughly $3 billion, these people said, though terms were still being negotiated. That would be well below Northwest's market value of more than $4.6 billion as of Feb. 1, reflecting the industry's worsening prospects in recent weeks." The airline industry has been keelhauled to the extend that United (NASDAQ:UAUA), Northwest, and Delta have lost over 30% of their market caps in three months.

The two significant stimulations for airline mergers now are rising fuel prices and a likely sharp drop in passenger demand as the economy slows. Since a merger will not be effective finished for several months, neither of these is addressed in the short-term.

For the rest of the story go to 24/7 Wall St.

There has been plenty of buzz lately about merger activity among the major airlines. The latest thought is that Delta Airlines, Inc. (NYSE: DAL) and Northwest Airlines Corporation (NYSE: NWA) will join forces in a battle against record-high fuel and other challenges to the industry. But despite the positive effect some feel consolidation may have on the airline sector, passengers are still facing stressful travel.

Crowded gates and cramped airplane seats. Delayed flights. The struggle to reduce one's toiletry kit to a series of three ounce portions. And it is only getting worse. A report in the New York Times reported that big airlines are cutting down on domestic capacity in 2008 and raising ticket prices while they are at it. For every $10 increase in a barrel of oil, airlines are forced to lift round-trip fares by an average of $18 (and who can blame them?). Black gold is currently hovering close to the $100 level; about a year ago, it was close to $50. In sum, air travel will be more expensive, and just as crowded (if not more so). In 2007, jets were already more crowded than they'd ever been, and posted the highest-ever percentage of late arrivals. Of the seven major carriers, all but Southwest Airlines Co. (NYSE: LUV) and Continental Airlines, Inc. (NYSE: CAL) reduced domestic capacity in 2007. United Airlines, of parent company UAL Corporation (NASDAQ: UAUA) expects to lower its domestic flight roster by 3% to 4% this year, and DAL plans to shave 4% to 5% of its current domestic flight offerings.

Adding insult to injury the Times reminds us: "Because full flights cause airlines all sorts of operational problems, travelers should also brace for continuing problems with delays and misplaced bags."

Since moving north to Chicago, I've become a quick fan of Amtrak. The seats are extremely roomy, you can walk around whenever you want, the food isn't bad, and there are outlets at every seat so I can work or watch DVDs throughout the ride. Tickets are cheap, and the service is pretty reliable. What isn't reliable are the timetables: a commuter ride to St. Louis gets in at a decent hour, but other destinations pull into the station in the middle of the night. And forget about the train if you're looking to go more than a few hundred miles. Until we have a better rail system, most of us are just stuck flying the decreasingly friendly skies.

Beth Gaston Moon is an analyst at Schaeffer's Investment Research.

Earlier this month, rumors hit the market that United Airlines (NYSE: UAUA) and Delta Air Lines (NYSE: DAL) were considering a possible merger. Shortly afterward, Delta officially denied the rumors, but not surprisingly, United Airlines CEO Glen Tilton did not deny that they were considering merger options, as many industry analysts believe that United is the perfect company for a possible merger.

The airline, which took flight in 1930, filed for bankruptcy following the 2001 terrorist attacks and has appeared to be preparing for a sale ever since emerging from its bankruptcy proceedings. United came out of bankruptcy last year, but the company is still up to its eyeballs in debt, and boasts a miserable 2% profit margin over the past year.

When looking at United a couple of factors jump out at you pointing to the notion that the company feels a merger is the best avenue to explore: