NEW YORK (Reuters) - Continental Airlines Inc (CAL.N) shares jumped more than 5 percent after an analyst said the airline could bid on United Airlines after being spurred by news that United and US Airways LCC.N are in merger talks.
Investors would “react favorably” to a United and Continental pairing, Stifel Nicolaus analyst Hunter Keay said. He upgraded Continental to a “buy” from a “hold.”
Continental and United, a unit of UAL Corp UAUA.O, are both part of the Star Alliance and discussed merging in 2008 before Continental ended talks.
Last week, news emerged that US Airways and United are in talks to create the No. 2 airline in the U.S., which could leave Continental in a tough spot, analysts have said.
“We expect CAL to respond with a bid for UAUA in the near term, partly as a defensive maneuver to protect its immunized JV, but also because of synergy benefits from creating the world’s largest airline,” Keay wrote in a note on Monday.
A spokeswoman for Continental, the No. 4 U.S. airline, did not return an e-mail message seeking comment. United declined to comment. Keay said he had no knowledge of any merger negotiations or talk between Continental and United.
Continental shares rose as high as 5.3 percent to $22.67, while the Arca Airline Index rose 1.5 percent. The broader S&P 500 was up slightly.
Reporting by Deepa Seetharaman. Editing by Robert MacMillan