SEATTLE (AP) _ US Airways has paid The Boeing Co. an undisclosed sum to settle a two-year dispute over the airline's abrupt cancellation of aircraft orders worth $1.9 billion.

Arlington, Va.-based US Airways on Friday acknowledged that the cancellation in 1996 was a breach of contract. The airline, instead, had bought 400 Airbus Industrie A320 jetliners.

The company had disclosed in a filing with the Securities and Exchange Commission that it would have been liable for $450 million in damages for breaching two contracts.

``Based on mutual business considerations, Boeing and US Airways have resolved our differences,'' the two companies said in a statement.

Boeing took the rare action of suing a customer for breach of contract, and US Airways counter-sued for $45 million, claiming Boeing had exaggerated labor costs for the airplane orders.

The settlement announcement followed US Airways' announcement Thursday that it is forming a partnership with American Airlines.

US Airways had long been a Boeing customer and American is also a major Boeing customer.

US Airways also announced several months ago that it was shopping for wide-body jets, and wanted to buy up to 20 Boeing 777s or Airbus A340s.