Merger on the horizon in the American skies between United Airlines and American Airlines?
According to Reuters, Scott Kirby, CEO of the American airline United Airlines, has floated the possibility of a merger with competitor American Airlines in a meeting with US President Donald Trump at the end of February. Bloomberg also reported that Kirby presented the idea to senior government officials.
Critics warn that if two airline giants attempted to merge it would be an “absolute disaster for passengers.” United and American Airlines are among the top four US airlines, together controlling over a third of the market.
At the moment, the two carriers involved in the rumors have not commented. However, the news caused American Airlines shares to rise by 8%, while United Airlines shares gained about 3%.
All the details.
GIANT OF THE STARS AND STRIPES SKIES ABOUT TO EMERGE?
The airline born from the merger of the first and second largest US carriers would control about 40% of air transport capacity in the United States, relating available seats to miles flown.
THE ANTITRUST CHALLENGE
Such a level of consolidation would worry competitors, who might be forced to pursue mergers themselves, highlighting the scope of the antitrust challenge.
Including international flights, United and American were already the two largest airlines in the world by available capacity last year, according to OAG, an aviation data company, reports the Guardian.
“A deal between United and American would reduce the ‘Big 4’ to ‘Big 3’, with a single dominant player. Competition issues would likely arise on many routes and hubs,” said antitrust lawyer Andre Barlow of the DBM Law Group, quoted by Reuters.
THE PRICE ISSUE
Valuation represents a further obstacle. TD Cowen analyst Tom Fitzgerald said American Airlines would likely ask for a price above $20 per share, based on its $14 billion in unencumbered assets. However, he questioned the realism of such a valuation, given the additional debt burden for United. American Airlines shares were trading around $12.
IMPACT ON TRAVELERS
Industry experts say a potential merger could also raise costs for the millions of passengers booking flights with any US airline.
“The idea that a single airline could be responsible for four out of ten flights every day is nothing short of horrible,” said William McGee, senior fellow for aviation and travel at the American Economic Liberties Project, a public interest organization focused on corporate mergers. “It would be harmful to consumers, workers, entire cities and regions,” reports the Cnn. “The mere fact that there is serious discussion about a single US airline controlling nearly 40% of the market is absurd,” McGee added, emphasizing that “We have never, in the entire history of this country’s airline industry, had such a high level of concentration at the top.”
THE US CIVIL AVIATION MARKET ALREADY EXPERIENCING A CONSOLIDATION WAVE
Cnn also recalls that the US airline sector has already undergone numerous mergers since it began carrying passengers about a century ago.
A series of mergers in the last 25 years has reduced the number of airlines from over a dozen to just four major ones: United, American, Delta, and Southwest, which together control 80% of the national air capacity. Two other airlines have capacity just below that of the big four: Alaska Air and JetBlue.
CONCERNS FROM AIRLINES FOR AMERICA (TRADE ASSOCIATION)
The trade association Airlines for America has already pointed out that past mergers have reduced costs and expanded connectivity, citing data showing a 1.5% drop in airfares between 2019 and 2024, despite an overall 23% increase in consumer prices.
THE TRUMP ADMINISTRATION’S POSITION
Finally, someone within the Trump administration has already spoken about the possibility of consolidation in the American airline sector.
Sean Duffy, United States Secretary of Transportation, indicated that there is room for mergers among airlines, but clarified that any potential deal would be carefully evaluated.
Last week, speaking on Cnbc, he said: “In the case of a merger among some of the major airlines, it would be necessary to divest part of the assets. However, I do not intend to make any preemptive commitments.”
