Merger Talk Sends Airlines Soaring

Updated from 1:49 p.m. EST

CHARLOTTE, N.C. -- Airline stocks closed sharply higher Thursday, as renewed speculation that consolidation is close at hand lifted the major U.S. carriers.

Delta(DAL) primed the pump because its board will meet Friday in New York to discuss whether to give CEO Richard Anderson permission to begin talks with Northwest(NWA) and UAL(UAUA), the parent of United Airlines, said a person familiar with the situation.

Although hedge funds have repeatedly pressured Delta's board to consider a merger, "the combination of tighter credit, the darkening earnings outlook and rising fuel prices" may have made the board more receptive to the possibility than it has been in the past, the person said.

The first report of Friday's meeting appeared in The Wall Street Journal. That enhanced the level of airline merger chatter that was triggered Thursday by the release of a letter to Delta pilots from Lee Moak, chairman of the Delta chapter of the Air Line Pilots Association.

"While we have been hearing about 'inevitable consolidation' for many years, it is becoming increasingly difficult to discount these facts and other recent events as simply more rhetoric," Moak wrote. "Consolidation may indeed be at our door."

Shares of all three carriers climbed sharply. Delta rose 18% to $15.98, and Northwest gained 32% to $15.85. UAL was rising 24% to $23.66.