Continental Abandons Merger Talks With United

Continental Airlines said Sunday that it had abandoned merger talks with United Airlines and was planning to remain an independent carrier, a blow to lengthy efforts by United to find a merger partner.

Continental's decision, announced by the airline Sunday afternoon, will change the complex game of musical chairs that the airline industry is playing after the merger announcement last week by Delta Air Lines and Northwest Airlines.

Continental's move was a stunning development for United's parent, UAL, which had been negotiating in expectation of reaching a deal by late this week. As recently as Friday, it looked as though Continental, based in Houston, and United, based outside Chicago, were on the way to reaching a merger agreement.

Continental decided to drop the discussions after UAL announced worse-than-expected earnings, which sent shares falling last week. On Tuesday, United said it lost $357 million during the first quarter, on sharply higher costs for jet fuel. The airline, which spent more than three years under bankruptcy protection earlier this decade, said it would cut flights and eliminate a further 1,000 jobs.

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