Airline consolidation has been a big topic of conversation in recent times. We’ve recently learned that JetBlue is reportedly looking to be acquired, and we’ve even seen the Transportation Secretary talk about how “Trump loves to see big deals.”
Generally when people think of potential consolidation in the US airline industry, Delta is an airline that doesn’t even come to mind. So while we’ve heard endless comments from United CEO Scott Kirby about mergers, we’ve heard very little from Delta CEO Ed Bastian… until now.
In this post:
Ed Bastian’s comments about airline consolidation
During yesterday’s Q1 2026 Delta earnings call, Bastian was asked about how he sees the industry playing out over the coming year given the spike in oil prices, etc. Here’s how he answered:
“You have a considerable portion of the industry that has not returned its cost of capital, has not made a profit in years. Going back over the last decade when we saw consolidation happen, we forget what drove consolidation. What drove consolidation was higher fuel prices back in 2009, 2010, 2011, and we were the leaders in that with the acquisition of Northwest in 2008.”
“I anticipate higher fuel prices will cause much more significant structural reform than we’ve seen over this period. COVID, I think, was a different animal, where no one was strong enough to engage in the type of rationalization that was necessary.”
“As we look forward to building a healthier business for the future, there’s a number of business models that I think their owners are going to start questioning whether they continue to commit capital to. However that plays out, it’s going to be of benefit to Delta.”
There are three key takeaways, as I see it:
- Bastian says that the number one thing that drives consolidation is higher oil prices
- Bastian expects “significant structural reform” in the near future, based on airlines being “strong enough to engage in the type of rationalization” necessary
- Bastian says that any type of consolidation or bankruptcy will be to the benefit of Delta
Are Bastian’s airline merger comments surprising?
I think I’m a bit surprised by the conviction with which Bastian is making these statements, assuming I’m understanding them correctly. Bastian is saying that he expects “much more significant structural reform” than during any similar past crisis?
It seems he’s suggesting consolidation rather than airlines just going out of business, based on the sentence after the above referencing how airlines now have the financial strength “to engage in the type of rationalization that was necessary.”
In terms of consolidation, it seems to me that any sort of a deal would include Frontier or JetBlue (or I suppose Breeze or Avelo, though those airlines aren’t publicly traded). So I question what kind of “significant structural reform” Bastian could be referencing?
Also, it’s of course logical for airline executives to spin everything as a positive, but I love how Bastian suggests that any and all consolidation is good for Delta. Yes, overall consolidation is good for existing players, in terms of eliminating competitors. But if we start to see Alaska, American, or United, acquiring JetBlue, then I think it’s hard to argue that will be a net positive for Delta (yes, there might be some concessions, but I don’t think they’ll be greater than the new competitive threats).
Bottom line
Delta CEO Ed Bastian has indicated that we could see significant industry consolidation in the near future, even more than we saw around 15 years ago, during the last major round of consolidation. However, he insists that any and all consolidation is good for Delta, even if the airline isn’t involved.
He’s more enthusiastic about consolidation than I would’ve expected, so I look forward to seeing how this all plays out.
What do you make of Bastian’s consolidation comments?
The US pumped tons of money into the US economy and to airlines during covid. Airlines that should have failed did not.
Even before covid there were airlines like AA and B6 that were barely profitable. Since covid, a number of other airlines were added to that list.
There is way too much capacity flying in the US that is being flown by airlines that are not profitable -which is undoubtedly why the...
The US pumped tons of money into the US economy and to airlines during covid. Airlines that should have failed did not.
Even before covid there were airlines like AA and B6 that were barely profitable. Since covid, a number of other airlines were added to that list.
There is way too much capacity flying in the US that is being flown by airlines that are not profitable -which is undoubtedly why the DOT Secy recently said that they would support further consolidation.
DL and every other airline would benefit from the removal of some capacity from the system.
The real question is what role DL takes in consolidation but it would be a mistake to think that DL won't participate in it. Bastian also noted that DL led the last major round of consolidation with the NW acquisition.
DL is the strongest airline in the US from a financial standpoint, runs a good operation, and yet still, like other airlines, has opportunities to grow its network.
The DOT Sec'y's comments that there will be assets spun off if the big 4 mergers are open indicate that they are willing to support carving up some airlines in order to address antitrust concerns.
The real issue is that most of the poor performing airlines have significant debt; no other company is going to be able to take portions of an airline without paying a premium to cover the debt or those airlines - or the remaining parts go through chapter 11 bankruptcy first or after a partial acquisition.
It isn't worth trying to speculate what DL might be interested in but it is certain that if consolidation starts, there are industry assets and market positions that DL would be interested in.
I don’t remember a time in my long life that the airlines weren’t discussing mergers in the industry.
The question is who are the people who are buying stock to become shareholders of any airline besides United or Delta?
Even so, most view airline investments as short term trades than long term investments.
As Warren Buffett has said, airlines are an extremely though investment thesis. They are very cyclical business and have very high costs.
Of course Delta benefits. All of the surviving airlines benefit. Airlines barely exist in competitive market, more consolidation further entrenches the oligopoly.
The big airlines already move the lockstep about anti-customer changes - it's basically collusion, which should not happen in actual markets.
And underpinning all of this is that the big airlines enjoy risk free capitalism - anytime things get bad, we bail them out.
Any merger activity will be in the smaller end or one of the major five (AA, UA, WN, DL, AS) potentially buying JetBlue. Any of the other smaller airlines, most of which are financially struggling, really won't do much for any of the major five. What would DL need with Avelo?
Bastain is obtuse and arrogant. He thinks he is the American Singapore Airlines but in reality is just a better Spirit
No one should be surprised by Bastian's "conviction." These calls are all about crafting a narrative, either for Wall Street, employees, or both. Whether or not he actually believes any of it is another story.