American Airlines says it’s not interested in United Merger
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[NEW YORK] American Airlines said it’s not engaged with or interested in any discussions regarding a merger with rival United Airlines, dampening the prospect of a tie-up that could reshape the industry.
United’s chief executive officer Scott Kirby had floated the possible combination directly to US President Donald Trump in February, Bloomberg reported earlier this week. American signalled that such a merger would be a bad deal in a statement late Friday (Apr 17).
“While changes in the broader airline marketplace may be necessary, a combination with United would be negative for competition and for consumers, and therefore inconsistent with our understanding of the Administration’s philosophy toward the industry and principles of antitrust law,” the statement from the Fort Worth, Texas-based airline said.
United representatives declined to comment.
American shares fell 1 per cent in extended trading at 6.55 pm in New York.
United and American are among the top four US carriers, together controlling more than a third of the market. A combination would create the largest airline on the planet. As a result, any merger between the two aviation giants would pose serious antitrust concerns and likely face significant backlash from consumers, politicians and rival US airlines.
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US airlines are grappling with higher jet fuel prices due to the US-Iran war. The uncertainty has thrust the idea of consolidation to the forefront. Kirby told employees in a memo last month that the carrier would benefit from any shakeout in the industry as part of rising oil and fuel prices, potentially providing acquisition opportunities.
US airline mergers have to be reviewed and approved by the Transportation Department, as well as the Department of Justice. Transportation Secretary Sean Duffy said the government would look at a number of factors when considering potential tie-ups, including the effects on competition – both domestically and globally – and ticket prices.
“President Trump, he loves to see big deals happen,” Duffy told CNBC on Apr 7. “Is there room for some mergers in the aviation industry? Yeah, I think there is.”
Despite the rebuff, American CEO Robert Isom has his work cut out for him. The airline has been navigating a spate of operational and strategic challenges, from cutting about US$35 billion in debt to trying to win back corporate flyers alienated by an unpopular – and since reversed – marketing strategy.
Isom also has faced backlash from pilots and flight attendants, who have called for him to step down after failing to keep pace with more profitable peers like United and Delta Air Lines. BLOOMBERG
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