New York, April 26 (Reuters): American Airlines has had early-stage merger talks with US Airways and is in advanced talks for an alliance with Continental Airlines, sources briefed on the situation said on Friday.

News of the talks comes after Delta Air Lines and Northwest Airlines announced nearly two weeks ago they planned to merge to become the world’s largest airline, seeking to counter skyrocketing fuel prices, a weak economy and a growing competitive threat from European carriers as trade barriers fall on trans-Atlantic travel.

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, Alitalia, Czech Airlines, Delta Air Lines, and Northwest Airlines, the people said.

Alliances have flourished in the industry because they generate profits through marketing programmes and flight code-sharing without the headaches of combining operations.