United calls off U.S. Air deal.(Chicago Tribune)

Thirteen months after proposing the controversial acquisition of US Airways, officials of United Airlines on Sunday said they are abandoning efforts to craft a deal that is acceptable to government regulators.

Sources within United said they are seeking an early release from a contract that has less than a month to go before United can kill the deal without a significant penalty.

"We are walking away from the deal," said a source familiar with the decision. "We have told US Airways that we cannot get the deal done and have suggested that we should agree to an early termination of this."

"We're not looking to restructure the deal" at a lower price, said the source within United, contradicting reports that first surfaced late Friday in the Washington area. "There is no point attempting to negotiate a new deal."

Under the deal, United must pay US Airways a $50 million breakup fee if it abandons the deal after Aug. 1. Before that date, the breakup fees are substantially higher, but United is asking US Air to limit the fees to $50 million.

Officials of US Airways, while not confirming that United has said it wants to pull out of the deal, said they will have to abide by the Elk Grove Township, Ill.-based airline's decision.

One US Airways official said United's pullout from the deal would be disappointing because Stephen Wolf, chairman of US Airways, believes the merger is in the best interest of the employees of the two carriers, the shareholders and the communities served by the two companies.