About six weeks ago I noted that while JetBlue is in talks with a variety of airlines about partnerships, aviation watchdog JonNYC noted that United was poking its nose around for opportunities. In response, United filed an SEC 10-K saying they’re not in talks about a merger with JetBlue. But they didn’t deny other potential arrangements (or that talks might occur in the future).
At an investor conference this week, United Airlines CEO Scott Kirby was asked whether United might buy another airline? “JetBlue is the obvious candidate” and don’t ask me, go ask JetBlue!
Kirby spoke at the J.P. Morgan Industrials Conference and JonNYC flags this exchange about airline mergers.
Excluding Spirit and Frontier, will we see or and or do we need more industry consolidation? And does United play a role in it?
Scott Kirby, CEO, United Airlines: I don’t know. I think it’s I probably think it’s less likely than others think. JetBlue is the obvious candidate. Joanna is going to be here later today. So you can ask her what she thinks.
…It’s possible. But there’s a lot of challenges, like I look at it from United’s perspective. We have a great plan that is working and mergers are so hard. They’re disruptive.
Your technology team spends two years on the sideline just integrating like I bet a lot of you use the United app. I bet you all think it’s the best app in the world in airlines because it is. Like that kind of investment just gets harder to do. We got some super cool stuff coming for customers this year. That stuff just gets harder and harder to do.
And at United, well, when the business plan is working, like the hurdle to go do it, we don’t need a deal for sure. The hurdle to go do a deal gets a whole lot higher.
That said, at least at United, I would like to have a bigger I’d like to have a presence on the other side of the river at JFK. But man, all the headache, all the brain damage of buying a whole airline to get that, that’s a lot to do. So, yes, really, I think the ball is going to be in JetBlue’s court.
…They’re also an airline that focuses on brand loyalty. So from the customer perspective, they have a lot of those sort of core DNA things that are expected there. Also competing with another airline, JFK and Boston that has that too.
So it’s a tough position for it to be in. So it’s sort of their decision on how to sort through that. That’s the only one that I think really is potentially in play one way or another.
A long shot but an insightful answer. JetBlue has something United wants – a significant presence at New York JFK. United gave us its presence there a decade ago under CEO Jeff Smisek, saying that JFK was unprofitable but not realizing that corporate customers on the West Coast would pull their business, preferring not to fly to Newark instead. JFK has the bulk of international with United’s partner carriers, and JetBlue would mesh well. There have also been rumors of United wanting a more substantial Florida presence which JetBlue has.
Yet mergers are hard, expensive and a distraction. So the question is, what would it cost? Would it get approved or dragged through the courts? And would the juice be worth the squeeze?
I’m surprised that Kirby answered the question, but it’s the most interesting airline CEO to listen to because he generally doesn’t pull punches, and he’s insightful about the industry. He lays out his beliefs clearly. They’re not always what Wall Street wants to hear and they’re not always right but he’s got a firm thesis about the world and his industry works and doesn’t hold back. That makes him the most interesting airline executive to listen to.
Whether it’s good for UA or not, Kirby would probably do it just to stick it to Robert Isom.
UA would also get BOS and a foot in Florida where it’s the weakest out of the Big 3. Also shiny new planes that can be deployed and more “heft” against AA and DL. Will it pass anti trust? With some concessions possibly particularly if a case can be made that JetBlue can’t compete as a standalone.
And yes Kirby would love to up one over what Parker did.
The glaring issue with United acquiring JetBlue is that United would then control far too much of the New York market, requiring divestiture of many of the coveted JFK slots. Barring that, JetBlue is the only thing standing in the way of a United/Delta New York duopoloy, particularly at JFK. Alaska acquiring JetBlue would make a lot more sense if the different types of aircraft could be worked out.
The glaring issue with United acquiring JetBlue is that United would then control far too much of the New York market, requiring divestiture of many of the coveted JFK slots. Barring that, JetBlue is the only thing standing in the way of a United/Delta New York duopoloy, particularly at JFK. Alaska acquiring JetBlue would make a lot more sense if the different types of aircraft could be worked out.
@Christian — Well, since you said it twice, you must be right! In all seriousness, for NYC to remain competitive, either jetBlue should remain independent or join AA–then again, let’s be real, the market is no longer governed by rules or fairness, it’s all about who can ‘kiss the ring’ and ‘pay up.’
If there must be consolidation, then the most sense is Jetblue to American, Southwest to Alaska, and/or let Southwest die and United swallows Alaska.
@derek — We don’t often agree on here, but on this topic, as mere consumers (as opposed to actual ‘experts’ in the industry or airline executives or majority shareholders), what you predicted makes a lot of sense to me, too, if there *must* be further consolidation (and I wish that there did not ‘have’ to be, but you and I don’t get to make these decisions now do we?).
Followed by bringing back the Civil Aeronautics Board to lock everyone else out of the market, no doubt.
@ 1990 — Just for fun, my prediction is that WN, AA, B6, NK and F9 all go bankrupt because of a massive recession triggered by the Orange Idiot. Doug Parker comes out of retirment (he’s only 63) to merge AA and AS via bankruptcy. DL acquires WN out of bankruptcy. UA acquires B6 out of bankruptcy. NK and F9 merge via bankrputcy. Consumers are totally screwed with just four US airlines remaining.
As soon as He e said the orange idiot I immediately knew that he knew absolutely nothing about what he was talking about. That was easy to stop reading that comment at that point. LOL
@Gene — I enjoy your and others imagination, and also expect some bankruptcies. I just hope it will not be Delta, because I’ve switched a lot of business to them, and that would personally upset me. I would be very careful fronting a lot of money or miles to WN, B6, NK or F9 these days. A couple hundred bucks, fine. Thousands? Nope. Not wanting to become a ‘creditor’ ever again.
@Airline Guy — Yeah, I get it, I prefer to still respect the office, so I often say, the President, even if I do not agree with His approach or policies.
@ 1990 — If DL goes bankrupt, we are all screwed. I’m sure they will go bankrupt one day (don’t all companies?), but hopefully not for a few decades. I’m sure you-know-who would agree!
@Gene — Welp, 100 years ain’t too shabby (Delta’s new pre-safety video mentions that esteemed anniversary). Come to think of it, most empires historically haven’t gone that far past 250-300 years, so we’ll see. 1,000 years? No thanks. At least they aren’t doing ‘awkward hand gestures’ or ‘Roman salutes’ or anything. Phew!
Just let JetBlue and American have what they had minus and let’s move on. We all know United and Delta already own too much of the NYC market and Delta certainly has a substantial presence in Boston. JetBlue should sell a few aircraft and sell their LHR slots and reforge the AA alliance.
(…minus) Minus what the Justice Dept. did not want them to have. Of course this Justice Department may be ok with things
Would love to see UA back in force at JFK but that merger would do nothing for those of us at other hubs. Also I’m not flying a tiny plane TATL on B6 or anyone else. So I say pass.
The glaring issue is that the “yield” in Florida is very very little. YES, we all want to go there, but it often is a lost leader. Let JB die on the vine, and pick up the pieces.
This is pie in the sky. If the government blocked JetBlue and Spirit from merging, and made JetBlue dissolve their JV with AA does anyone really think they would allow UA to buy JetBlue?
Gene,
I don’t often agree w/ you but if the industry goes through another round of consolidation that involves the big 4, then your suggestion might make the most sense.
AA has holes on both the east and west coasts. They have a better chance of fixing the east coast on their own and they could really benefit if AS was the acquiring carrier in terms of getting some good management.
B6 would fix UA’s problems in Florida and at JFK but alot of people forget that a merger of two “non-equals” means that the larger airline’s costs become the cost basis for the new airline – which is why a merger between UA/B6 or AA/AS would not likely succeed and may not actually be pursued.
and if DL acquires/merges with WN, they would be the best fit in many regards compared to AA and UA. DL and WN have little network overlap now that WN has retreated so much in ATL and WN and DL have similar employee and customer cultures. It is highly unlikely to ever happen but if WN fails to turn itself around in the next year that Elliott has set as the deadline, Elliott might be giving DL a call.
all of that assumes that merger activity between the big 4 can happen, let alone among the big 4.
@Tim Dunn — You and Gene nailed it. I hadn’t even thought of the possibility of a Delta and Southwest merger. I mean, the old-school SWA (before these negative changes) fits so much better with the ‘welcoming’ ethos of present-day Delta–the focus on people, inclusivity, etc. And clearly DL would ‘love’ more influence in Texas.
Key question: SWA has its unions, flight attendants included. That may complicate things a little. SWA’s folks are going to want job security. DL’s flight attendants may fear they would be more easily replaced if SWA’s union members have greater job security. Given the high probability of economic distress in these coming months and years, that could get… ‘spicy.’ With the earlier attempted jetBlue/Spirit merger, there was a divide between those airlines’ unions–one supported, the other opposed–then again, the court blocked it, so moot point. Any thoughts on all that?
first, i don’t think it is at all likely unless WN really falls apart.
But if DL and WN really think a deal needs to be done to save WN, there will be ways to make it all work.
While WN is very unionized, their employees like DL’s have always been very well aligned with the company’s intentions.
It remains to be seen how well WN employees will remain loyal to the company during all this transition but I will bet they will do well.
There are many places where WN is strong which could help DL. and DL clearly runs a better business than WN – something that WN employees and Elliott can see.
if you are going to talk about UA and B6, then you have to extend the conversation to its logical conclusion.
compared to DL and WN, UA/B6 is chump change.
@ 1990 — With all due respect, the guy is definitely orange, and he is arguably an idiot. Just sayin’…
@Tim Dunn — Based on how Elliott’s recent influence–it seems more like a private equity-led destruction of the airline. Like, it’s as if Southwest is the next Kmart, as they loot the once-great airline, while the C-suite gets their golden parachutes ready–I imagine those at the top would make out like bandits in a merger.
As a relatively powerless consumer and passenger, it’s somewhat sad to watch. It reminds me of the film ‘I Care A Lot,’ which was about a con artist who makes a living as a court-appointed guardian, seizing and selling the assets of vulnerable elderly people–but in this metaphor, the con artist is the private equity firm, the elderly victim is Southwest, and we, the passengers, are the elderly victim’s children, who are powerless to do anything about all of it.
So, if the airline ceases to exist, I wonder if it would be more like Pan Am (bankruptcy, Delta just purchasing assets) or more like Northwest (an actual merger). Either way, hopefully Delta would indeed ‘save the day’–that would be a glimmer of hope, especially for those of us who have greater confidence in DL’s leadership and capabilities. On the bright side, at least each airline already had their respective tech meltdowns (2022, 2024), so maybe it is meant to be! Bah!
@Gene — Personally, my favorite nickname was Jon’s in 2016: ****face von clownstick, but I guess I’m old-school. Back then, He was merely a candidate. Either way, we’re a ‘free’ country, so we can call anyone whatever silly names we wish…for now…right? *gulp* Right??
A Merger or Partnership with AA is the only one that actually makes sense from a Gov perspective because it’s the one that “grows the pie” and brings down prices for some consumers. Delta or United would too much of the NE and/or NYC. Not sure why a Judge struck down the NEA anyways.
Ben,
AA could apply for a MERGER with B6 but the NEA was about a revenue merger runaround trying to exclude the cost side of the equation.
As UA is now the largest carrier in terms of size, I think it would be a very difficult road to that merger ever being approved. And I know that AS/HA haven’t even gotten to single certificate yet but I believe that another acquisition by Alaska to join AS/B6 would be amazing. AS with its great west coast presents and throughout the pacific and JetBlue it hits great east coast coverage and routes into Europe where Alaska wants to fly very soon, would make a great combination! I have a lot of friends at B6 and they are all hoping Alaska will come knocking. Plus the combination of AS/B6, they would still be in 5th place as far as size in the US so a better chance of being approved.
I’m wondering if Elliott Investment Management is playing a deeper game. Maybe they have invested in the other big USA airlines and are expecting that stock to go up after destroying Southwest Airlines. By carefully investing under disclosure limits, they could be lurking. Southwest Airlines will lose market share, IMO, and that should be good for the other airlines.
Internet experts in the comments. Everyone knows what they are talking about.