United-American Merger Talk Still Alive As American Airlines CEO Fights It At Shareholder Meeting

United Airlines CEO Scott Kirby keeps talking about a merger with American Airlines. He refuses to say the idea is dead. Yet media reports of his remarks keep saying he says it’s dead.

For instance, here’s Reuters: “United Airlines CEO rules out consolidation push after American rebuff”

• But what Kirby keeps saying is that a deal won’t work without American Airlines management being on board. American Airlines management isn’t onboard, so everyone hears that the deal is dead.

• When Kirby is clearly trying to keep the pressure on American Airlines management, trying to keep the idea of a deal alive, in order to bring them around.

American Airlines publicly rejected a merger two months ago. Kirby had United send out a mass email to their full data file at the end of April arguing that a merger would have been great, had only American been willing to go along. The only reason to send it is because you’re really still arguing for it.

Even so, Kirby keeps talking about it. If it were truly an idea that was in the past, he wouldn’t keep pitching the benefits in virtually every public conversation that he has.

And if it were truly in the past, American Airlines wouldn’t need to keep talking about it. In fact, they re-made their case why it’s a bad idea in Wednesday morning’s annual shareholders meeting.

1. That shows American management is feeling pressure from Kirby’s strategy. He’s keeping the idea alive, and they need to address it.

2. It’s only being addressed because the idea is still alive, not because it’s dead.

American CEO Robert Isom was asked about merger activity, and he took the opportunity to argue that American is already the product of several significant mergers, to this management team has deep experience evaluating and executing mergers. But for a United deal, the political and regulatory environment is just too hostile. The better path to value for shareholders is executing the airline’s existing plan for improving profitability.

The consistent feedback from the administration to state attorneys general and across the entire political spectrum is that such a transaction would be a nonstarter.

American Airlines CEO Robert Isom

Kirby pitched the merger to President Trump. If the President were on board, they could get federal antitrust signoff. This just works differently than it did in past administrations. But signoff from the federal government isn’t all that they need.

• State attorneys general can bring their own antitrust suit. And they’d have a very good case – even with divestitures in places like Chicago O’Hare and at LAX and probably D.C. (considering National and Dulles airports together).

• A future administration could sue to break up the combined airline.

• Foreign governments get a bite at the apple, especially the U.K., Canada, Mexico and Japan and even in South America. They need more than signoff from the Trump administration – they need it actively pressuring foreign governments to approve the deal, too.

Robert Isom feels the need to continue to argue that this deal is “a nonstarter” because it is not dead yet, not because it is. That said, Scott Kirby gets a costless way to keep American Airlines on the defensive.

United Airliens CEO Scott Kirby

American is arguing the anticompetitive nature of the deal (which is true enough). But they aren’t really making the compelling case that they’ll get back to profitability on their own, let alone earn a strong return on capital. Keeping this alive may be fun for Kirby.