MADRID – Vueling’s share price rose sharply on Monday after the low-cost Spanish carrier confirmed it was in merger talks with its domestic rival Clickair to create the third-biggest airline in Spain.

Vueling’s stock closed up 6.36 percent at EUR 9.70 after reaching an intraday high of EUR 10.08.

Trading in the airline’s shares was briefly suspended by the National Securities Commission (CNMV) after a report by financial daily, Cinco Días, saying Vueling and Clickair had signed a pre-agreement on a tie-up aimed at being able to compete better with budget carrier leaders Ryanair and easyJet.

The trading halt was lifted after Vueling’s leading shareholder, Inversiones Hemisferio, filed a statement with the CNMV saying it had held talks with a number of companies in the sector – including Clickair – with a view to a merger.

Hemisferio said it had yet to reach an accord, but added the talks could continue. Both Clickair and Vueling use Airbus 320s and are headquartered in Barcelona.

Spanish airlines are suffering from cut-throat competition and soaring fuel costs. Vueling’s losses widened last year to EUR 63.2 million from
EUR 10.8 million a year earlier as average ticket prices dropped by 20 percent.

Spain’s biggest airline Iberia has a stake in Clickair. It has also tabled a bid for SAS Spanish unit Spanair, Spain’s second-biggest carrier.

[Copyright El Pais / Adrian Soto 2008]