American Airlines parent AMR Corp. and US Airways Group Inc. aremoving closer to a merger, and a decision could come early nextmonth, people familiar with the matter said.

Teams from each carrier are discussing how to combinedepartments, including personnel, compensation and severance, saidthe people, who asked not to be identified because details areprivate. AMR's board will meet Jan. 9 to decide whether to goahead, with an announcement possible within days, said the people.The talks may yet be scuttled or delayed, they said.

The push follows AMR's efforts to reorganize in bankruptcybefore a merger and US Airways's quest to lead a takeover thatwould create the world's largest airline. The chief unresolvedissues pending with AMR's unsecured creditors committee, which mustapprove any exit plan, are how to divide the equity in a newcompany and who would run it, three people said.

US Airways President Scott Kirby and Denise Lynn, senior vicepresident for people at American, have been involved in talks withpilots from each carrier, along with Jack Butler, the attorney forthe creditors' panel, two people said.

An agreement may be completed this week on work rules for eachpilot group until a joint contract is negotiated with a mergedcarrier, one person said. Kirby is leading the merger analysis forUS Airways Chief Executive Officer Doug Parker, people familiarwith his role have said.

AMR is “actively taking part in ongoing discussions” with itspilots, US Airways and the smaller airline's pilots, MichaelTrevino, a spokesman, said in an e-mailed response to questionsabout department-level planning, the board and a possible mergerannouncement by the Fort Worth, Texas-based carrier.

US Airways declined to comment about meetings with AMR, saidTodd Lehmacher, a spokesman for the Tempe, Arizona-basedairline.

Parker, Kirby and Butler met yesterday with the board of the USAirline Pilots Association, which represents US Airways pilots, inCharlotte, North Carolina, said James Ray, a union spokesman. Hedeclined to comment on the substance of the talks. Lehmacher alsodeclined to comment.

US Airways rose 0.5 percent to $13.55 at 10:03 a.m. in New York.The shares have more than doubled this year on merger speculationto lead gains in the Bloomberg U.S. Airlines Index.

Bond Rally

Investor optimism about a merger also has helped fuel a rally inAMR debt. The $460 million of 6.25 percent convertible notes dueOctober 2014 traded yesterday at 84.75 cents on the dollar,according to Trace, the bond-price reporting system of theFinancial Industry Regulatory Authority. The notes traded at 17.75cents after AMR's bankruptcy filing on Nov. 29, 2011.

AMR CEO Tom Horton has said the company's future should beresolved “soon,” after completing contract changes that provided$1.06 billion in labor savings, and that he hasn't ruled out amerger. In the past he backed a stand-alone bankruptcy exit, withtie-ups to be considered after that.

He met last week with the Allied Pilots Association board todiscuss AMR's progress in bankruptcy and plans for the future thatinclude adding about 550 new jets to replace aging planes andincreasing international service to attract more businessfliers.

After becoming CEO when AMR filed for bankruptcy, Horton focusedfirst on the idea of remaining independent. US Airways beganpursuing a merger in January and said in April that its bid wasbacked by unions for American's pilots, flight attendants andmechanics and baggage handlers.

A combination of American, the third-biggest U.S. carrier, andNo. 5 US Airways would surpass United Continental Holdings Inc. asthe world's largest airline, based on passenger traffic.

The case is in re AMR Corp., 11-15463, U.S. Bankruptcy Court,Southern District of New York (Manhattan).

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