Northwest Airlines Soars on Reports of Merger with AMR

Shares of Northwest Airlines (NWAC Quote) surged Friday following reports that AMR (AMR Quote), the parent company of American Airlines, was seeking to acquire it.

Northwest's stock was up 6 1/16, to 21%, to 35 1/8 in morning trading, while AMR shares were off 15/16, or 3%, at 28 1/2. (Northwest Airlines finished up 6 3/8, or 22%, at 35 7/16. AMR closed down 1 1/8, or 4%, at 28 5/16.)

On Thursday night, KSTP-TV, a Minnesota television station, reported that Don J. Carty, American's chief executive, and John Dasburg, Northwest's president and chief executive, have spoken about a possible merger. The report was attributed to unidentified "well-placed sources."

Representatives from each of the companies declined to comment on the report, which could not be immediately confirmed.

A deal between American, the world's second-largest airline, and Northwest, the nation's fourth-largest, would put an end to speculation that American might offer a counterbid for US Airways (U Quote), which recently announced an agreement to be bought by UAL (UAL Quote), the parent of United Airlines, for $4.3 billion.

UAL's acquisition of US Airways set off considerable speculation about the possibility of further industry consolidation. In addition to a Northwest-American deal, industry analysts said a merger between Delta Air Lines (DAL Quote) and Continental Airlines (CAL Quote) might also be in the offing.

A deal between Eagan, Minn.-based Northwest and Fort Worth, Texas-based American could face a host of obstacles similar to those that may obstruct the deal between UAL and US Airways, namely combining their workforces and their huge information technology networks.

For the deal to get regulatory approval, Northwest would also have to selloff its 14% equity holding and 51% voting stake in Continental.