American Airlines shares up on takeover talk

CHICAGO (Reuters) -- Shares of AMR Corp. parent of American Airlines, rose more than 7 percent Monday amid persistent talk in the stock options market about a possible takeover of the company.

According to a Susquehanna Financial Group's research note, takeover rumors sparked unusual bullish options order flow.

Video More video Europe's rail networks are uniting to take on the airline industry. Play video

"We saw an influx of near-term call buyers in AMR (Charts, Fortune 500) this morning amid unconfirmed takeover chatter stemming from multiple sources," the note said.

William Lefkowitz, options strategist at brokerage firm vFinance Investments, also noted the talk. An AMR spokesman did not immediately respond to a request for comment.

Late in the session, nearly 10,000 contracts traded in the August $30 calls - allowing investors to buy AMR shares at $30 within the next few weeks. Those calls rose in price to 90 cents a contract, up 40 cents on the day.

Earlier this year, American was among several U.S. airlines said to be eyeing merger partners. The consolidation talk died down in late January, however, after Delta Air Lines (Charts, Fortune 500) rejected a hostile bid from US Airways Group (Charts, Fortune 500).

Speculation also swirled that major airlines like American were potential targets for private equity firms.

Further support for AMR shares came from a Goldman Sachs note, which raised the brokerage's estimates.

Goldman analyst Robert Barry raised his 2007 earnings estimate to $2.75 per share from $2.35 and his 2008 estimate to $4 a share from $2.65.

He linked the higher target to an assumption that the price of jet fuel will fall relative to the price of crude oil in the fourth quarter of 2007 and all of 2008.

AMR shares were up 6.3 percent on the New York Stock Exchange late Monday.