United Airlines’ Position on Acquisitions Amid Rising Fuel Costs
United Airlines is still open to acquiring airport slots, gates, and other assets, particularly if increasing fuel prices pressure less stable competitors. However, CEO Scott Kirby indicated on Sunday that the airline is unlikely to pursue a significant merger, especially after the unsuccessful bid for American Airlines.
In April, Kirby turned down American Airlines’ merger suggestion, which had initially been broached to him, though he had previously discussed the idea with President Trump in February. U.S. CEO Robert Isom dismissed the merger proposal, citing concerns that it would be anti-competitive and detrimental to customers.
Kirby shared his thoughts during the International Air Transport Association’s annual meeting in Rio de Janeiro, stating, “I don’t think consolidation is very likely for United. That doesn’t mean we won’t continue to go into the market to buy assets, but consolidation is unlikely.”
Defending the rationale behind the agreement with American Airlines, Kirby expressed his belief that it would be beneficial for consumers. Yet, he emphasized that such a large and non-traditional transaction couldn’t move forward without the backing of American Airlines’ management.
Kirby felt confident that labor unions, shareholders, and customers would have supported the merger. However, he noted that opposition from U.S. management made the deal unfeasible, explaining, “We cannot put it on the public record that management has been anticompetitive.”
When questioned about potentially revisiting the American Airlines deal, he reiterated that any future negotiations would require a “willing partner.”
Additionally, Kirby denied any discussions with the Trump administration regarding giving the U.S. government golden shares as part of a merger proposal.
With rising fuel prices pressuring airline margins, a divide is emerging between strong airlines with powerful brands and weaker rivals lacking pricing strength.
Kirby mentioned that United anticipates fare increases will position the airline to recover fully from the impact of rising fuel costs by year-end, signifying confidence in demand despite the uptick in ticket prices. While demand remains robust, he acknowledged that fare hikes would eventually have some effect.
Several airline executives noted that the current fuel crisis is distinguishing stronger airlines from the weaker ones. Kirby explained there’s a significant difference between airlines that have cultivated customer loyalty and those that primarily compete on price.
Responding to criticism from Willie Walsh, president of the International Air Transport Association, who claimed major U.S. airlines are hindering competition, Kirby argued that United and Delta succeed because they focus on branding and services that customers value.
“Customers care about technology, service, reliability and products,” he expressed. “They seek a great experience, not just a seat.” Kirby underscored that United’s strength lies more in its operating income than its balance sheet, allowing it to continue investing while similarly sized competitors struggle to break even.
When asked if JetBlue would become a more appealing acquisition target if it filed for Chapter 11, Kirby was skeptical, citing JetBlue’s cash reserves and unencumbered assets as deterrents.
Lastly, Kirby dismissed the notion of fuel hedging as a viable long-term solution to the industry’s volatility concerning fuel costs, labeling it “ineffective when losses occur over time.” He acknowledged that while Delta’s refineries are advantageous in the current climate, United does not plan to acquire refineries like its U.S. counterparts.
