British Airways shares gained 8.5p to 235p in early trading today following confirmation that the carrier is in talks to forge alliances with Continental Airlines and oneworld partner, American Airlines.

If the carriers successfully applied for immunity from antitrust regulators, they would be able to liaise more closely over fares and frequent-flyer programmes and to coordinate their schedules. The trio may also push for a joint purchasing agreement, which would allow them to gain economies of scale by bulk buying jet fuel, catering and parts.

However, discussions are not thought to include any plans for a merger at this time because foreign ownership rules of US airlines would prevent such a move.

Andrew Fitchie, aviation analyst at Collins Stewart, said: "It’s clearly too soon, with the situation too preliminary, to assess any sensible valuation impact of the announcement; it is entirely possible that the discussions will be fruitless.

"History tells you that even if talks were to progress beyond the current stage, the regulatory negotiations would be protracted and there would be an immense amount of noise generated by competitors and unions in an attempt to scupper any deal.

Consolidation moves in the US could precipitate a scramble for talks amongst the European majors; we believe BA’s position at Heathrow will make it a sought after partner and provide leverage in any situation."

BA and American Airlines have sought antitrust immunity twice, in 1997 and 2001, but were hindered by regulators that would approve their application only if the two airlines disposed of some of their valuable landing slots at Heathrow.

In a brief statement yesterday, BA said: “British Airways is exploring opportunities for cooperation with American Airlines and Continental Airlines.” A spokeswoman refused to provide further details.

Any attempt to merge the operations of the three airlines will prompt outrage from rivals, who fear that a BA-AA-Continental alliance would dominate the lucrative transatlantic route. Sir Richard Branson, president of Virgin Atlantic, has already fought off previous attempts by BA and AA to merge and he reacted angrily to their latest attempt to join forces.

He said: "A link-up between BA and AA is still anti-competitive and now they have the cheek of trying to add Continental to the mix too. This triple whammy would reduce effective competition across the Atlantic and the regulators should make it absolutely clear that it would have no chance of getting off the starting grid. This combination would act against the interests of passengers and Virgin Atlantic will fight tooth and nail to ensure that regulators say no way BA/AA/Continental."

BA and American Airlines are currently partners in the oneworld global alliance, which brings together ten of the world’s airlines. The talks with Continental may involve it joining this group, which would be a blow to the rival SkyTeam alliance.

Last weekend Continental announced that merger talks with United had broken down completely. The talks were the latest in frenzied attempts by the US airlines to stave off another period in Chapter 11 bankruptcy protection. They have been badly hit by the rising price of oil and reported enormous collective losses of $1.5 billion in the first quarter alone.

Delta and Northwest have already agreed to merge and United is now thought to be talking to US Airways about a possible joint venture.