ATA Holdings Gains on Deal Talk

The parent of low-cost carrier ATA Airlines is reportedly in talks to sell all or part of the carrier.
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ATA Holdings

(ATAH)

stock jumped more than 18% Thursday after a news report said the struggling airline company was in talks to sell all or part of its operations to competitor

America West Holdings

(AWA)

.

ATA, which owns ATA Airlines, was up 49 cents, or 18.6%, to $3.13. America West was up 14 cents, or 2.9%, to $4.98.

The Wall Street Journal

reported the talks Thursday, citing sources familiar with the situation, and said it wasn't clear how much AWA might pay for ATA or whether a deal would go through. Another airline company,

AirTran Holdings

(AAI)

has held preliminary talks with ATA, the

Journal

said. AirTran was up 25 cents, or 2.5%, at $10.46.

Rumors about who is kicking the tires at ATA have swirled since the airline -- which is coping with record fuel prices at the same time it is loaded with debt from new airplanes -- said in August that it could run out of cash early next year and might be forced to sell assets.

Stuart Klaskin, partner at KKC Aviation Consulting, said ATA might be interested in selling assets separately to more than one acquirer. "If they strike a large deal, I think it would be one where one carrier takes some planes and routes, and the other takes different planes and routes," he said.

He noted "persistent" rumors that America West was eyeing ATA's gates at Chicago's Midway airport, as well as its 757 jets, while AirTran has been rumored to be interested in the routes where ATA flies 737s.

An America West spokesman declined to comment. Spokespeople at ATA and AirTran did not return phone calls.

Elsewhere, low-cost darling

Southwest Airlines

(LUV) - Get Report

stock rose after the airline reported higher income in the third quarter, as revenue grew and Southwest kept a lid on costs even as fuel prices spiked. It was the airline's 54th consecutive profitable quarter. Southwest has limited the damage from sky-high jet fuel prices with its aggressive fuel hedging program.

Southwest shares were up 42 cents, or 3.1%, to $13.99.