(April 27): United Airlines Holdings Inc chief executive officer Scott Kirby confirmed he approached American Airlines Group Inc and that talks have ended, laying out the virtues of a merger that he said could have strengthened corporate America and won approval from regulators.
Kirby posted a lengthy statement on Monday morning addressing the rationale for a combination, from the economic boost to the jobs that it would have created to what he called “a truly globally competitive airline”. In the end, talks went nowhere because American didn’t go along, he said.
“I always knew that the only way any merger could be successful [and approved] is if it was great for customers and with a willing partner that shared my big, bold vision,” Kirby wrote in the statement, the first time he’s confirmed that a merger with his former employer was considered. “Without a willing partner, something this big simply can’t get done.”
Bloomberg News first reported on Kirby’s interest in American earlier this month, in what would have been an audacious transaction to create by far the world’s largest airline. American Airlines CEO Robert Isom has said he’s not interested in a deal with United, and US President Donald Trump has also said he’d prefer seeing the companies remain separate to ensure more competition.
Part of Kirby’s appeal was to to build a globally dominant brand — to “create a great, new US airline with the scale to compete and lead around the globe” — a thinly veiled appeal to Trump and the president’s penchant for a dominant corporate America.
Speaking to analysts last week, Isom called a deal with United “bad for customers, bad for the industry, and then, ultimately, that would be bad for American Airlines.”
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“The idea of the two largest airlines in the world getting together, that is something that we’ve viewed as being anti-competitive,” he said at the time.
Kirby said that with divestitures in certain domestic markets, he believes “regulators would have approved such a deal because they would have recognised the benefits to customers, our shared employees and communities from coast-to-coast and around the world”.
While Kirby was clear that talks have ended, he went to some lengths laying out the logic and benefits of a deal, suggesting he might yet see if there’s a path back to the negotiation table. He said American’s comments suggest that a merger of the kind he’s suggesting “is off the table for the foreseeable future”.
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Kirby didn’t say when discussions started and when they ended, but Bloomberg reported that he floated the idea of a combination in a White House meeting in late February.
Linking up United and American would have brought together two of the four major US carriers, at a time when many airlines are seeing their costs surge because of rising fuel prices. Kirby has had a testy relationship with American, where he previously rose through the ranks but failed to clinch the CEO position, ultimately leaving to join United.
Combining forces was not out of a sign of weakness, Kirby wrote, but instead would have helped build scale that ultimately benefits customer.
“The bold idea I wanted to pursue was about growth that would usher in a brand new era of leadership by US aviation,” Kirby said.
The political backdrop may also make a deal of this scale more conceivable than in recent years. Transportation Secretary Sean Duffy said earlier this month that there is room for airline mergers and that Trump “loves to see big deals happen.”
Such comments mark a shift from prior administrations that were more sceptical of consolidation.
Trump has also been weighing in on the fate of individual carriers. He said last week he is considering having the US purchase beleaguered Spirit Aviation Holdings Inc as his administration considers a potential rescue for the struggling ultra-low-cost airline.
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The intervention would be highly unusual, with officials weighing options including providing as much as US$500 million in financing in exchange for warrants that would give the government the right to purchase a large stake in Spirit.
The discussions underscore how actively the White House is engaging in the industry at a moment when airlines are exploring consolidation and other structural changes.
United shares declined less than 1% as of 7.04am before regular trading in New York. American was little changed.
Uploaded by Felyx Teoh
