(May 28 )(Bloomberg) -- The chief executive officers of UAL Corp.'s United Airlines and US Airways Group Inc. will meet tomorrow to discuss a possible merger as rising fuel prices add to pressure for a tie-up, people familiar with the talks said.

United's Glenn Tilton and US Airways' Doug Parker will try to make progress on labor, financing, seating-capacity cuts and other issues that have slowed work on a merger, said the people, who asked not to be named because the matter is private.

The face-to-face meeting comes more than two months after the talks began. A 20 percent surge in jet fuel this month is straining carriers' finances and spurred American Airlines' May 21 announcement of the industry's biggest service reductions.

Pairing United and US Airways would provide ``capacity and cost cuts that are necessary in a high-fuel-price environment,'' Jim Corridore, a Standard & Poor's analyst in New York, said today. United is the second-largest U.S. carrier by passenger traffic, while Tempe, Arizona-based US Airways is No. 7.

Jean Medina, a spokeswoman for Chicago-based United, and US Airways spokeswoman Andrea Rader declined to comment about the discussions between Tilton, 60, and Parker, 47.

Issues still unresolved in the carriers' talks include how to mesh unions, the people said. US Airways, which merged with America West Holdings Corp. to exit bankruptcy in September 2005, has yet to negotiate unified contracts with the unions for its pilots and flight attendants. Those work groups at United and US Airways already have said they oppose a potential merger.

United and US Airways agreed earlier that a combined carrier would be based in Chicago and would achieve about $1.5 billion in annual cost savings and added revenue, people familiar with the talks have said.

Consecutive Losses

Both carriers are coming off two consecutive quarterly losses, with UAL's $537 million deficit the biggest among U.S. airlines last quarter. US Airways posted a $236 million loss.

They're also the two worst performers this year among 14 carriers in the Bloomberg U.S. Airlines Index. UAL and US Airways have tumbled 78 percent and 72 percent, respectively, compared with a 38 percent plunge for the index.

UAL fell 27 cents, or 3.3 percent, to $7.91 at 5:19 p.m. New York time in Nasdaq Stock Market composite trading. US Airways dropped 36 cents, or 8.1 percent, to $4.08 in New York Stock Exchange composite trading.

Besides a merger, United also is considering staying independent as well as seeking an alliance with Continental Airlines Inc. that would include authority to set pricing and schedules, people familiar with the matter have said.

A Continental alliance would provide most of the benefits of a merger while avoiding regulatory challenges and labor integration.

U.S.-based carriers have been evaluating merger options since Delta Air Lines Inc. agreed April 14 to buy Northwest Airlines Corp. in a stock swap now valued at $1.96 billion.

Continental rejected United as a possible merger partner on April 27, saying it preferred to remain independent. Houston- based Continental also is being wooed to join AMR Corp.'s American and British Airways Plc in the Oneworld airline alliance.

(Editor: Jia Fu)