United Airlines remains open to buying airport slots, gates or other assets if higher fuel prices put weaker rivals under pressure, but it is unlikely to pursue a major consolidation deal after its failed overture to American Airlines, Chief Executive Scott Kirby told Reuters on Sunday.
Kirby said in April that American declined to engage after he approached it about a merger, an idea Reuters reported he raised with President Trump in February. American CEO Robert Isom rejected a tie-up as anti-competitive and bad for customers.
“I think consolidation is unlikely for United,” Kirby said in an interview on the sidelines of the International Air Transport Association’s annual meeting in Rio de Janeiro. “That doesn’t mean we won’t still be in the market to buy assets, but consolidation is a low probability.”
Kirby defended the rationale for a deal with American, saying he believed it would have benefited consumers. But he said a transaction that large and unconventional could not be completed without support from American’s management.
The United chief said he believed labor groups, shareholders and customers would have supported the deal. But American management’s public opposition made the transaction impractical, he said. “You can’t have the management team on record publicly saying it was anti-competitive,” Kirby said.
Asked whether United had given up on American or could return to the idea later, Kirby repeatedly said any deal would require “a willing partner.”
He also denied that United had discussed with the Trump administration giving the U.S. government a golden share as part of any merger proposal.
Higher fuel prices are testing airline margins and widening the divide between larger carriers with stronger brands and weaker rivals with less pricing power.
Kirby said United expects that higher fares will put it on track to recover later this year the full hit it has taken from surging fuel prices, underscoring the carrier’s confidence in demand despite rising ticket prices. He said demand has stayed strong, though United expects higher fares eventually to have some impact.
Several airline executives have said the fuel shock is separating stronger carriers from weaker ones. Kirby framed the divide as one between airlines with customer loyalty and those still competing largely on price.
He rejected criticism by Willie Walsh, head of the International Air Transport Association, that large US carriers are squeezing out competition. Kirby said United and Delta Air Lines are winning because they have invested in brands and products that travelers value.
“Customers care about the technology, the service, the reliability, the product,” Kirby said. “They want a great experience. They don’t just want a seat.” Kirby said United’s advantage is less about its balance sheet than its operating profit, which allows the airline to keep investing while some similarly sized rivals are just breaking even.
Asked whether JetBlue Airways would become more attractive to United if it entered Chapter 11, a financial restructuring process, Kirby said he thought that scenario was unlikely, citing JetBlue’s cash and unencumbered assets.
He also dismissed fuel hedging as a structural answer to the industry’s exposure to volatile fuel costs, saying it is “ineffective if you lose money over time.”
While he acknowledged Delta’s refinery is helping it in the current environment, Kirby said United is not interested in following its US rival by buying a refinery.
Credit: Source link
