United Airlines and US Airways have called- off the talks regarding a merger due to the fact that United is about to align itself with Continental Airlines, The Wall Street Journal reported on Friday, citing sources familiar with the situation.

However, it looks like the growing concerns about labor opposition and integration costs were also another factor that led to the suspension of the merger talks.

The two US airlines stooped the merger negotiations after Glenn Tilton, chief executive officer of United's parent firm, UAL Corp. of Chicago, told Doug Parker, the head of US Airways Group Inc. of Tempe, Arizona, that his company was very close of reaching an alliance deal with continental.

After raising around 35 billion dollars in losses and finally managing to exit from a five -year slump in 2006, the US airlines are trying to merge or at least ally with one another in order to have greater market power.

The talks between the two airlines have started more than two months ago, and chances for United to reach a deal with Continental were small, since it had rejected a total merger with UAL around a month ago.

However, it seems like the Houston based Continental changed its mind about a possible alliance, since Tilton announced Parker of the situation at lunch on Thursday, the Journal said. Yet, Tilton did not totally cancel the possibility of a merger in the future, even if for now it is not the case.

A deal with Continental would not be as costly for United nor would it attract as much attention from the U.S. Justice Department.