CHARLOTTE, N.C. -- Shares of US Airways (LCC) and United ( UAUA) were surging Thursday as traders sought to profit from merger chatter.

Shortly before noon, US Airways stock was up 84 cents to $7.66, while United stock was up $1.65 to $20.60. Stock in

Continental

(CAL) - Get Report

, which has also been involved in merger speculation with United, was up 85 cents to $21.35.

Analysts generally applauded the possibility that US Airways and United might merge.

JPMorgan analyst Jamie Baker said the deal would make sense "as both the most logical and feasible among potential legacy combinations," given the two airlines' synergies in labor and fleet and their membership in the Star Alliance.

Another key is that US Airways and United have long been the two carriers most eager to make a deal. They agreed on terms in 2000, before United backed away, and then talked again in 2006.

Baker noted, however, that regulatory barriers could be steep, with some capacity cuts required. In particular, a combined carrier would dominate both Washington Dulles and Washington National airports.

Barclays Capital analyst Gary Chase said a deal combining United with either US Airways or Continental would generate annual savings due to synergies of $250 million to $400 million annually, despite the potential for "labor cost dis-synergies," given the strong possibility of labor incentives.

"There are no losers on this news, in our view," Chase wrote. "We believe the whole group should rise. Given our views on longer-term potential within the space, today's reaction (is) unlikely to drive any of the names we follow to uncomfortable highs even without consolidation." Chase said he favors

American

(AMR)

,

Delta

(DAL) - Get Report

and United.

UBS analyst Kevin Crissey said consolidation is likely in the next few years, but he likes airline stocks because of industry conditions that include reduced capacity and cyclical improvement. Crissey also noted that for United, Continental is "probably a better alternative" than US Airways. Continental CEO Jeff Smisek said last month that if conditions warranted, he would resume consolidation discussions with United that broke off two years ago.

-- Written by Ted Reed in Charlotte, N.C.

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