BA flies high after talks with American rivals

British Airways soared to the top of the FTSE 100 leaderboard yesterday, the day's biggest riser after news it was in talks with US rivals American and Continental about increased cooperation.

Analysts believe these discussions are about potential alliances rather than an immediate merger, but said even this could give huge impetus to the airline's transatlantic business.

Dresdner Kleinwort said: "We speculate that the aim of any talks would be to include Continental in the oneworld [10 airline alliance] and secondly, to apply for anti-trust immunity on the North Atlantic with the potential to set up a joint venture on those routes. The implications are longer term, but position BA for North Atlantic mergers if and when regulation changes."

Andrew Fitchie, at broker Collins Stewart, said: "Consolidation moves in the US could precipitate a scramble for talks among the European majors; we believe BA's position at Heathrow will make it a sought-after partner and provide leverage in any situation." He has a buy recommendation on the shares and a 370p target. Yesterday BA closed 16.5p higher at 243p.

Overall the leading index closed unchanged yesterday at 6087.3 points, unmoved by an opening rise on Wall Street. The US market had climbed around 80 points by the time London closed, following better than expected US manufacturing figures for March and a rebound in US technology stocks.

Positive results helped drinks can maker Rexam, up 19.5p to 467.25p, and newly merged information group Thomson Reuters, 53p better at £16.15. Miners bounced back after Wednesday's falls, with Xstrata 86p higher at £40.32 and Kazakhmys up 33p at £16.15.

A major drag on the market was medical devices group Smith & Nephew, down 85p to 570p after it revealed it had found unacceptable sales practices at Swiss group Plus Orthopaedics, which it bought a year ago.

Builders continued to come under pressure as more gloomy news emerged about the housing market. Dresdner Kleinwort issued a note claiming that confidential industry figures showed sales reservations had fallen by two-thirds year-on-year in the last two weeks, during the spring selling season.