I can't believe this one, but here it is... I can't make this stuff up.

By Jui Chakravorty Das

NEW YORK, April 25 (Reuters) - American Airlines (AMR.N: Quote, Profile, Research) has had early-stage merger talks with US Airways (LCC.N: Quote, Profile, Research) and is in advanced talks for an alliance with Continental Airlines (CAL.N: Quote, Profile, Research), sources briefed on the situation said on Friday.

American Airlines' talks with Continental are focused on forming an alliance that could share passengers, much like the SkyTeam partnership that includes Air France-KLM (AIRF.PA: Quote, Profile, Research), Alitalia (AZPIa.MI: Quote, Profile, Research), Czech Airlines, Delta Air Lines (DAL.N: Quote, Profile, Research), and Northwest Airlines (NWA.N: Quote, Profile, Research), the people said.

But Continental is also in advanced talks with United Airlines (UAUA.O: Quote, Profile, Research) for a full merger, the sources said. Continental will not pursue both options but rather, end up choosing either the merger or the alliance, sources said.

Meanwhile, United Airlines is also in serious merger talks with US Airways, and will choose to merge with either Continental or US Airways soon, the people said.

http://www.reuters.com/article/marke...0080425?rpc=44