United renews bid for US Airways

The proposed merger priced US Airways at more than three and half times current value

At the insistence of US Airways, United Airlines has reluctantly agreed to rejoin its efforts at a merger it recently said would be unlikely to get government approval.

The move, announced on Thursday, follows United's announcement early last week that it was calling off the $4.3bn (£3bn) merger.

United's profits have slipped amid an economic slowdown

United, one of the world's biggest carriers, blamed the deal's early termination on speculation it would not pass regulatory muster.

But US Airways has forced United's hand, suggesting that if it did not renew efforts at completing the merger, it might pursue legal remedies.

US Airways asked United to send the deal on to federal regulators for an official response, which United had said as early as June has little chance of getting approved.

"In keeping with its obligations under the merger agreement, UAL Corp will continue to pursue the transaction," United Airlines said in a prepared statement.

Threat of litigation

Under the agreement with US Airways, United faces a $50m termination fee, despite calling the deal off before the 1 August deadline.

US Airways seems to be saying you can't leave the theatre until the fat lady sings

George Hamlin, aviation consultant

A stipulation in the merger agreement calls on both parties to pursue "all reasonable efforts" to seal the deal.

"US Airways seems to be saying you can't leave the theatre until the fat lady sings," said George Hamlin, vice president of Global Aviation Associates, a consulting firm.

Mr Hamlin added that US Airways has little to lose by pushing United to further pursue the agreement.

Experts say US Airways is insisting on sending the deal on to Washington in order to insulate itself from a lawsuit from its shareholders, who are biting at the bit to get a generous price for their shares.

Both airlines' stocks have been battered in the last year.

Even when it was announced in May 2000, United's $60-a-share bid for US Airways was viewed as generous.

Shares of the Arlington, Virginia-based airline were trading in the mid-$20 range prior to the merger announcement and leapt to near $50 a share when United made its announcement.

US Airways stock ended Thursday's trading at $17.