United CEO Scott Kirby Pitched Buying American Airlines — The Man It Fired Wants The Ultimate Revenge Deal

United Airlines CEO Scott Kirby has pitched regulators on the idea of buying American Airlines.

When Transportation Secretary Sean Duffy talked about the possibility of airline mergers – and that President Trump likes to see “big deals happen” – everyone assumed this referred to the possible acquisition of JetBlue, by United, American, Southwest or Alaska. But perhaps “big deals” was a clue.

• Scott Kirby was fired as President of American Airlines. He loves to troll – and beat – American, and clearly relishes his airline’s outperformance. This would be the ultimate comeuppance.

• This would give United the presence it’s looking for in New York, make them the largest player in Los Angeles, and give them a hub in the Southeast.

• Under traditional antitrust analysis, this would never be permitted. Together the two airlines would have more than one-third of the domestic airline market. Their combined position in Chicago and Los Angeles would not normally be permitted. New York might be considered a problem, to the extent that Newark and the New York airports are considered one market.

One imagines that some of the most extreme competitive concentration, such as in Chicago, could be addressed by spinning off the American Airlines position there – the way that United and US Airways had once proposed to create ‘DC Air’ under the ownership of BET founder Robert Johnson, before ultimately walking away from that deal amidst competition concerns and an economy that was turning south. Duffy himself references the possibility of carving out and disposing of assets to address competition concern.

But it’s not enough to get signoff from the Department of Justice. So even if these are unusual times for the executive branch of the federal government, and the Department of Justice cleared such a merger under Hart-Scott-Rodino review, declined to sue to block it or agreed to a settlement,

• Any state can sue to block the merger and seek an injunction under the Clayton Act on behalf of their residents.

• Individuals and groups can also sue, provided they can demonstrate standing and can demonstrate antitrust injury. That includes competitors, customers, suppliers, and unions.

So any potential combination between American Airlines and United would face not just significant scrutiny under traditional federal antitrust rules, it would face a flurry of opposition by states and private actors as well.

Ultimately, consolidation of this sort is not likely to benefit consumers (the traditional antitrust analysis). That’s not just about airfares, it’s about products and services, and even frequent flyer programs. The barriers to entry in the airline industry are significant, from competition being blocked by government-granted slots and gates to limits on foreign investment, to regulatory barriers to starting new carriers.

That doesn’t mean all mergers ought to be blocked. Spirit Airlines would have been stronger had the Biden administration not blocked JetBlue from acquiring it (though JetBlue would likely be weaker!). Still, this is one of the wilder suggestions we’ve seen. But it lends new significance to United Airlines CFO Mike Leskinen telling investors that “it’s a unique environment that — where M&A is possible.”