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Airline stocks surge on merger talks

By Aaron Smith, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- The stock price for United Airlines and US Airways jumped in pre-market trading on reports that the two airlines are engaged in merger talks.

The stock price for Phoenix-based US Airways (LCC, Fortune 500) surged more than 20% before the bell, and the stock for UAL Corp (UAUA, Fortune 500)., Chicago-based owner of United Airlines, jumped more than 7%.

Reports of a possible merger between the two airlines have been bandied about for years, but they have resurfaced in the wake of the Delta Air Lines (DAL, Fortune 500)-Northwest merger of 2008.

But spokespersons for the airlines declined to confirm or deny the reports. United spokeswoman Jean Medina and US Airways spokesman Todd Lehmacher both said, "We don't comment on rumors or speculation."

However, executives at United Airlines and US Airways have both indicated that their companies are open to partaking in a merger, according to statements made at a Reuters conference earlier this year.

Airline analysts have said that the industry, hard-hit by the recession and fuel price volatility, is crowded with carriers and at least one of them has to go, either through merger or bankruptcy.

The number of domestic and international passengers on U.S. airlines declined 5.3% in 2009 compared to the year before, according to the U.S. Bureau of Statistics. The International Air Transport Association has forecast an industry-wide global loss of $5.6 billion in 2010, following an $11 billion loss in 2009.

Robert Mann, owner of airline industry analysis and consulting company R.W. Mann & Co., said in a recent interview that a Continental Airlines (CAL, Fortune 500)-United Airlines merger makes much more sense than a United-US Airways merger, because Continental and United already have a codeshare partnership and are "co-located" in Chicago, a major hub for both carriers. To top of page

Index Last Change % Change
Dow 16,790.19 13.76 0.08%
Nasdaq 4,748.36 -32.90 -0.69%
S&P 500 1,979.92 -7.13 -0.36%
Treasuries 2.04 -0.02 -1.02%
Data as of 5:30am ET
Company Price Change % Change
General Electric Co 27.29 0.47 1.75%
Bank of America Corp... 15.69 -0.01 -0.06%
Alcoa Inc 10.98 0.56 5.38%
Freeport-McMoRan Inc... 11.83 0.66 5.90%
Micron Technology In... 18.22 0.65 3.70%
Data as of Oct 6


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