Usair

In a decision that will have a lasting impact on who dominates the skies over the Baltimore-Washington metro area, US Airways and United Airlines agreed to terminate their merger agreement yesterday after the U.S. Department of Justice said it would sue to block the $12.3 billion deal. Justice officials issued a sweeping condemnation of the proposed merger, saying that it would harm consumers throughout the United States by increasing fares and reducing service and competition, particularly in the Baltimore-Washington area.

The parent company of United Airlines said yesterday that its $4.3 billion takeover of US Airways isn't likely to happen by the end of the second quarter. "We have a very complicated transaction," said Frederic "Jake" Brace, senior vice president-finance of UAL Corp., United Airlines' parent, referring to the deal that was unveiled nearly a year ago. "Taking regulators through it is just taking a long time." In a filing with the Securities and Exchange Commission, UAL said: "Given the complexity of the transactions and the review process, the company is no longer optimistic that it will close the transaction in the second quarter."

US Airways Group Inc. said yesterday that it will post a bigger first-quarter loss than analysts expected because of intense competition, a slowing economy and fewer business class travelers. Analysts polled by First Call/Thomson Financial had originally estimated a first-quarter loss of $1.12 per share for the parent of US Airways, which United Airlines parent UAL Corp. wants to buy for $11.6 billion. Company officials declined to release figures, but said earnings would be "well below" consensus estimates.

Citing higher fuel costs and intense competition from low-cost airlines in the Northeast, US Airways Group Inc. yesterday reported a net loss of $89 million in the fourth-quarter excluding one-time charges. The parent of US Airways said the larger-than-expected loss amounts to $1.33 per share before the special items, compared with a loss of $47 million, or 68 cents per share, during the same period a year ago. Analysts polled by First Call/Thomson Financial on average had anticipated a fourth-quarter loss of $1.05 per share.

Though some travelers would benefit, a combined United Airlines and US Airways would dominate the rest of the industry, stifle competition and force other airlines to merge to keep pace, says a report released yesterday by the investigative arm of Congress. The General Accounting Office said the $11.6 billion deal would leave United, the largest U.S. carrier, with slightly more than a quarter of the U.S. market and $9 billion, or 33 percent, more in annual revenue than its nearest competitor.

Citing a potential loss of service and decreased competition at Baltimore-Washington International Airport, the state has begun a campaign against United Airlines' proposed takeover of US Airways. John D. Porcari, the state's transportation secretary, met with antitrust officials at the Justice Department last month urging them to block the acquisition. Annapolis also has enlisted the help of the state's congressional delegation. Should the merger go through, United has said it would reduce the number of US Airways' Baltimore flights.

The $4.3 billion in cash that United Airlines dangled in front of US Airways last week might have simply been too tasty to turn down. For shareholders, it will mean a 130 percent payoff for an otherwise lifeless stock. The chairman and the chief executive will take home $130 million and $88 million, respectively. And the deal will pad the account and the reputation of US Airways' largest stockholder - a prominent hedge fund that had withered along with the value of its investment in the airline.

US Airways, the nation's sixth-largest airline and the dominant carrier in the Baltimore-Washington market, has agreed to be purchased by industry giant United Airlines, in a deal that would further expand the country's largest carrier and tighten its grip on the Northeast market. US Airways officials told the heads of the airline's employee unions yesterday evening that United plans to buy the Arlington, Va.-based carrier, according to a source who attended the meeting and spoke only on condition of anonymity.

The union of flight attendants at US Airways rejected an offer for binding arbitration in its 3-year-old labor dispute yesterday, triggering a 30-day "cooling-off" period after which the employees are free to strike or take other action against the airline. The Association of Flight Attendants rejected the National Mediation Board's offer to resolve its stalled contract negotiations with US Airways Group Inc. Under federal law, the union must wait for the cooling-off period to expire before calling a strike, but it can continue to negotiate.

US Airways customers won't see any "chaos" caused by flight attendants during the holidays, but analysts are still waiting before declaring an end to the airline's labor troubles.Officials for the Association of Flight Attendants say they are reserving the right to demonstrate at airports during the holiday travel season after a federal mediation board's order last week to continue negotiating a new employment contract.The order delays the union's threatened strike or walkout -- a plan dubbed "chaos" by the union, short for "create havoc around our system."