According to Hunter Keay, a Stifel Nicolaus analyst, Investors would “react favorably” to a United and Continental pairing.  Keay upgraded Continental from a “hold” to a “buy.”

Both part of Star Alliance, Continental and United discussed merging in 2008 before Continental ceased talks.

In previous weeks, news surfaced that US Airways and United are in discussion to create the No. 2 airline in the U.S., which would put Continental in an uncomfortable position, analysts have stated.

“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 explained in a letter on Monday.

No comment was received from a spokeswoman from Continental, the United State’s No. 4 airline. Keay stated that he had no knowledge of any merger agreements or talk between Continental and United.

Continental shares shot up as high 5.3 percent to $22.67, while the Arca Airline Index rose 1.5 percent. The broader S&P 500 was up slightly.

Source: Reuters