United Airlines reportedly in merger talks with Continental Airlines

The majority of North and South American carriers’ shares were up on Thursday (15-Apr-2010) on news United Airlines has reportedly entered merger negotiations with Continental Airlines and analyst upgrades. A decline in oil prices (-0.4%), to USD85.51, and a gain in the Dow (+0.2%) also helped airline stocks move higher. The US market gained for a sixth consecutive session, as the industrial sector rose on news manufacturing is improving in a number of regions.

United Airlines now reportedly in merger talks with Continental Airlines

United Airlines (+5.3%) shares soared after news Continental Airlines (+2.2%) reportedly recommenced merger discussions with United Airlines. Most of the merger groundwork is already in place from previous merger discussions in 2008, which Continental walked away from in favour of joining the Star Alliance. United was previously said to be in discussions with US Airways (-0.1%).

Meanwhile, Air Line Pilots Association's (ALPA) United Master Executive Council stated it believes "Continental, rather than US Airways, represents a more logical merger partner for United Airlines". ALPA claims the merger would contain fewer route overlaps and greater attainable synergies.

See related report: United, Continental renew merger talks

UPS pre-announces improved earnings for 1Q2010

UPS (+5.3%) also rallied after pre-announcing a 37% increase in adjusted diluted earnings per share for 1Q2010. The results were powered by a significant acceleration in the international package and supply chain businesses and improved operating margins across all three segments.

Adjusted 1Q2010 earnings totalled USD0.71 per diluted share compared to an adjusted USD0.52 in the previous corresponding period. On a reported basis, diluted earnings per share were USD0.53 compared to USD0.40 for the previous corresponding period, an improvement of 33%.

UPS CFO, Kurt Kuehn, stated the carrier expected the first quarter to be “the most challenging of 2010 as the economic recovery gathered steam through the year," However, revenue was "stronger than expected due to international volume gains, increased yields in the US and growth in Forwarding and Logistics".

Alaska Air price target raised by Barclays; American Airlines cut

Alaska Air (+2.0%) also rose after Barclays Capital raised its price target for the carrier from USD51 to USD57, with an ‘Equal-Weight’ rating. The analysts also raised targets on the following carriers:

  • Continental Airlines (+2.2%): raised from USD24 to USD25, rating ‘Equal-Weight’;
  • United Airlines (+5.3%): raised from USD23 to USD25, rating ‘Over-weight’;
  • US Airways (-0.1%): raised from USD8 to USD9, rating ‘Equal-Weight’.

Meanwhile, ratings of American Airlines (+0.7%) and Delta Air Lines (flat) were both cut:

Elsewhere, Expressjet (-2.0%) fell on reports it is the most inefficient US airline in terms of Revenue per Employee (RPE), according to SmarTrend. RPE for the carrier totals USD127,000. Copa (-1.5%) and JetBlue (-0.8%) were also down.

Also featured in today’s America Airline Daily:

North & South America selected airlines daily share price movements (% change): 15-Apr-2010