BA shares jump on US airline deal talk

London: British Airways (BA) shares jumped almost four per cent on Thursday amid speculation about what kind of deal it might ink with American Airlines and Continental Airlines and the possibility of wider consolidation among European major carriers.

BA announced late Wednesday that it was "exploring opportunities for cooperation" with the two US airlines, leading to suggestions that it would extend its oneworld alliance with American Airlines to include Continental.

Analysts said the expanded alliance could also seek antitrust immunity to set prices and schedules.

US airlines have been scrambling to merge or form new alliances since Delta Air Lines and Northwest Airlines announced plans to merge earlier this month and analysts said the consolidation push could now spread further afield.

"Consolidation moves in the US could precipitate a scramble for talks amongst the European majors," said Collins Stewart analyst Andrew Fitchie. "We believe BA's position at Heathrow will make it a sought after partner and provide leverage in any situation." The British carrier's shares were up 3.9 per cent at 235.25 pence ($4.67) in midday trade on the London Stock Exchange.

The three carriers have declined to elaborate further on the talks.

Continental said over the weekend that it would not pursue a combination with another carrier right away, a surprising move after weeks of growing speculation that it would join with United Airlines to create the world's biggest airline.

UAL Corp-owned United and US Airways Group are now in advanced talks on joining their businesses to create what could be the world's largest carrier.

With US law prohibiting mergers with foreign airlines, analysts said that antitrust immunity would be at the top of the list of the trio's talks. "Antitrust immunity would create significant revenue and cost benefits and strengthen the product offering," Panmure Gordon brokerage said.

BA chief executive Officer Willie Walsh has balked at proposals from regulators that they would provide antitrust immunity in return for the carrier surrendering some valuable takeoff and landing slots at Heathrow.

Takeoff and landing slots at the airport are sold for as much as $60 million a pair.

The 'open skies' agreement which allows more airlines to serve Heathrow if they can find slots, could potentially ease regulatory objections to a new BA-American agreement.