CHICAGO (Reuters):

SHARES OF Northwest Airlines Corp. gained more than five per cent yesterday, bolstered by news that the airline has ended a dispute with its pilots.

One analyst said investors in the company have taken comfort in a deal reached last week between Northwest and its pilots that boosts pay and may put a stop to the high number of cancellations that cut revenue by US$25 million in the second quarter.

"It has been oversold and people are realising that," said Calyon Securities analyst Ray Neidl, referring to Northwest's stock.

Northwest, which completed a 20-month restructuring in May, was plagued at the end of June and July by an extraordinarily high number of cancellations that it linked to pilot absenteeism.

The pilots union, however, said the workers were simply following the terms of their contract and that Northwest, the fifth largest airline in the United States, was asking too few pilots to fly the busy summer schedule.

The Air Line Pilots Association and Northwest last week reached a deal that would boost pilots' pay for flying more than their required hours. Union leaders officially approved the pact on Saturday.

Northwest shares were up 5.14 per cent at US$18.20 in morning trade on the New York Stock Exchange. The rally follows a sell-off last week that took the stock as low as US$15.76.

Neidl said the decline provided a good buying opportunity. Further support for Northwest stock may have come from market talk that Morgan Stanley raised its rating on the shares.