United Airlines Considering Buying Another Airline

United Airlines Senior Vice President of Financial Planning John Gebo told the carrier’s employees that the carrier is open to mergers and acquisitions, according to a recorded heard by serial airline leaker JonNYC. My bet is this doesn’t happen, but there’s a way that it could.

How on earth can United be considering acquiring another airline?

  • They consider themselves in a position to acquire another airline even as they go to the government hat in hand for a third round of subsidies?

  • On the other hand they have so much government cash already (they’re only required to spend about 10% of what they received from the second payroll bailout on employees they had furloughed) that why not?

  • And at the point travel recovers, United is restricted by its federal bailouts from paying dividends or buying stock, so options for cash are limited.

  • In normal times, with a new Democratic administration, anti-trust would be a huge problem. However asking for bailouts also helps make the case to allow acquisitions, arguing that greater consolidation is necessary to save the acquirer, the acquired, or both.

So who could United consider acquiring?

  • It would almost have to be a smaller airline. They aren’t in a financial position to acquire Delta or Southwest, and would have antitrust issues with both (New York in the former case, Houston and Chicago in the latter). American Airlines is too large and a huge problem in Chicago.

  • But JetBlue’s great assets include its New York presence, while United is dominant at Newark. Alaska Airlines is strong in San Francisco, where United has a hub. To go after either they’d have to be willing to divest themselves of a portion of their position.

  • They might consider a regional airline, like Mesa, Republic, or SkyWest but they couldn’t really add large regional jets because of their pilots agreement.

Ultimately I’d bet against United acquiring another airline. But if they did so they’d need to make concessions in relevant hubs and sell the story as banding together for survival.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. Unless some airline is tremendously undervalued, why would UA not simply grow themselves organically? Buying another airline gets them into an antitrust thicket and it delivers them a predefined combination of equipment and goodwill along a route network that will never be exactly what UA wants.

    Rather, I’d have them acquire the equipment they actually want, select routes they actually want and, based on whatever research they can perform, perhaps add a couple more “focus cities” like Atlanta or Dallas.

  2. If they do go ahead and buy another airline, they will Destroy everything they touch. They will turn them into a Dumpster Fire just like United.

  3. You’re forgetting Alaska. I’m sure they would love to get under that and take away the AA partnership. As well, gain a lucrative SEA stronghold. SFO could pose an issue with regulators but these days I am sure they are fine with getting rid of some slots so as to eliminate Alaska as a competitor there.

    I never got Alaska anyway as a brand. I realize they have a strong passionate following, but it’s a horrid brand name anymore given their expansion nationwide and purchase of Virgin America. How many people who have no idea, like maybe 80 y/o Mabel in St Louis, look at a possible flight on Alaska Airlines and think…”huh?” They honestly should have kept the Virgin name and paid Branson. Besides, Bob Marley on the tail of the planes is just weird.

  4. Jet Blue has been the rumor for as long as I can remember, and intensified after Smisek pulled United out of JFK. Jet Blue would give United prime real estate at JFK (they’d have to give up slots at EWR,so what) and BOS while cutting in to Americans grip on South Florida, effectively making FLL a small hub. Although, Jet Blue’s fleet doesn’t jive well with United, with the operation of the E190-70’s being a big speed bump. Alaska strengthens United’s grip on the west coast, by re-establishing a large presence in SEA and growing the ultra lucrative SFO market share, albeit with slot concessions. Alaska’s fleet strategy fits in to United core fleet better with only the 737 and 319/320. I can also see an acquisition of a regional (skywest or republic) as a subsidiary to strengthen the pilot hiring pipeline. Pilot shortages aren’t going away and many of the 55+ age group are leaving early because of the pandemic slowdown.

  5. Given the market share of the big three; it’s hard for me to imagine that the Biden Administration would allow any of the Big 3 to acquire a mainline carrier. One of the regional guys? Sure but don’t see how that would do much for them. How about out of the box thinking? Emulate some of the European carriers and acquire a financial troubled non-US airline that gives United a useful hub to build the network?

  6. I can’t see how AS would be considered as an acquisition target by UA. Especially with the King of Spreadsheets at the helm (Kirby. But you already knew that…)

    Isn’t AS still loaded with debt from the Virgin America acquisition? Too pricey once the market rebounds.

    JetBlue? Possibly but that would be limited to the East Coast/Midwest markets, not West Coast.

    Are there any carriers in Europe that are in trouble that would open up slots internationally for UA?

  7. B6 makes sense purely for JFK/BOS and Florida presence. There are also a lot of former UA mgmt employees at B6.

    RIP Mint.

  8. Bankrupt Virgin Atlantic would be a great choice for the Heathrow slots alone as well a being a big blow to their biggest rival business carrier, Delta.

  9. I could see UA and DL merge. UA was going to merge with DL but then went with CO.
    AA is already hooked up with AS and B6 and they could merge.
    WN is a domestic carrier (mostly) with a different business model.

    International travel will likely remain way down for years. If the variants continue and new variants continue to evolve, we get in an endless cycle.

    Two international US carriers is likely enough.

  10. No more! I loved Continental, but United wasn’t as nice.I guess I hate changes. I’m not going to think about this one unless it happens.

  11. @Britney but that 49% stake is mostly wiped out in a VA bankruptcy. The debtors will take over the equity, and they can sell to anyone that wants to buy.

  12. Tory —

    The Virgin Atlantic bankruptcy is structured to preserve Delta’s stake. DL will remain a 49% owner post-bankruptcy.

    Also, per UK law a foreign entity cannot own more than 49% of a UK company.

  13. @Storm if that is the case, a company can always accept new investments and issue shares that would dilute down that 49%. UA could buy into a larger stake than Delta, and then Delta would probably want to sell its remaining diluted stake at that point (probably to UA). Unlikely, but still possible if VA needs the cash badly enough.

  14. I know this is far fetched, but partial investment in a foreign carrier? ET is going private at some point.

  15. I agree with others that the best-fit whole airline is JetBlue (I don’t see Alaska making sense, since UA doesn’t need a second west coast Pacific hub), but he also mentions going after assets as an alternative to whole airlines. What assets would United want to get, other than the obvious? (a few JFK slots) I wonder if they could make an offer for AA’s assets at DCA, which is a constrained, undersized hub for AA (and who needs the cash). Combining DCA with IAD would give UA more viable scale in DC like DL has done with LGA+JFK. Of course even better would be getting AA’s ORD assets (mostly unprofitable for them) so UA could turn ORD into what ATL is for DL, but I don’t see the feds letting that happen.

  16. United has the lowest market share of its hub/largest city markets of any airline except for JetBlue. Competition has by far grown the most in UA’s hubs of any carrier.

    UA might want to grow into other carrier markets but its full-time job is to protect its own markets right now.

    Any mergers or acquisitions by UA will lead to certain and much larger share loss in UA’s own largest markets.

  17. Wow so this was an article about NOTHING. No source no evidence no reasoning, just “UA could do X, but probably wouldn’t. But if they did, they would look at Y but that doesn’t make sense so they likely won’t” what a god awful waste of bandwidth this article is

  18. @Tim Dunn Here’s a fun one for you, from the Wall Street Journal herself:

    “The bottom line for Delta during the pandemic has been bigger losses than rival airlines selling all their seats. Delta was the most profitable U.S. airline in the final six months of 2019. That flipped during the pandemic. In the last six months of 2020, Delta had the biggest losses, with a net loss of more than $6 billion, greater than United and Southwest combined.”

  19. @Tory- why would United bother getting into a bidding war over VS? Just so it can spite Delta? VS offers little to nothing for United- especially right now. Furthermore, VS isn’t going to de-value it’s stock just to attract United. VS has become fully entrenched in the DL system, and reverting that would cost VS far more than any nominal gain UA would bring to it. United needs to be focusing on internal changes instead of investing in a recently bankrupt airline. While DL may have had worse losses than United this past year, DL (and AA as well) have both made necessary changes, most notably simplifying their fleets and retiring older aircraft. This will allow DL and AA to be much more competitive when business picks back up. United (for unknown reasons) has retired virtually no aircraft during this time (aside from a few 757’s), even though they have fleets that they can very clearly retire (most notable their non-ER 777-200s).

  20. United to buy another airline. That’s BS they had another airline and they tore it apart. They took Expressjet the best regional airline the US had and tore it from limb to limb.

  21. Wondering what people’s thoughts are on this in light of the DOJ challenging the American and JetBlue agreement? Seems like a merger would receive even more scrutiny.

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