Well, this could get pretty interesting pretty quickly…
JetBlue explores potential merger opportunities
Semafor reports that JetBlue has hired advisers to assess the viability of selling itself to a rival airline, and has specifically scenario-planned how a deal with United, Alaska, or Southwest, might do in terms of regulatory approval. JetBlue’s stock is up over 13% on this news, so on that front, it’s the biggest development that we’ve seen at the airline in a long time.
JetBlue hasn’t turned a profit since before the pandemic, and while the airline has been trying to return to profitability, that has proven more challenging than planned, with seemingly endless setbacks. I imagine things are looking especially uncertain right now, given the situation with oil prices.
Historically, airline consolidation has faced massive regulatory scrutiny, though clearly the belief is that this is the best chance they have, with the Trump administration generally being more open to consolidation than the Biden administration was. That’s a belief shared among all airline executives.
It’s noted that the current M&A planning is preliminary, and the airline could decide not to pursue talks with any other airlines. It’s also not known if discussions have already taking place, or if interest has been received yet. In response to all of this, JetBlue has only released the following statement:
“We’ve made meaningful progress on our multi-year JetForward strategy and are focused on executing the plan. We’re confident JetForward is the right strategy to restore profitability and create value for our shareholders and opportunities for our crewmembers.”
JetBlue and United launched a partnership last year, and all signs point toward United being theoretically interested in some sort of consolidation with JetBlue. Roughly a year ago, United CEO Scott Kirby stated that “the ball is going to be in JetBlue’s court” when it comes to consolidation. However, he has also pointed out that mergers are a lot of work, and that United is already on a good path, and doesn’t need a merger to succeed with its strategy.
My take on a possible JetBlue merger partner
Over the past couple of years, I’ve written many posts about possible JetBlue merger scenarios. Here’s my general take:
- United is the obvious candidate, given what United’s management has suggested, plus us knowing that United’s CEO is obsessed with having a big presence at JFK; however, I think this will be the most challenging for regulatory approval, unless Kirby’s brown-nosing of Trump has finally paid off
- I just don’t see much upside with a Southwest merger, as I don’t really see what Southwest would gain with this, and Southwest also seems to still be committed to sticking to an all-737 fleet, and I don’t think adding two different aircraft types (with several variants) would be terribly logical; but the fact that JetBlue views this as being one of the top three contenders makes me wonder what I’m missing
- Alaska is on some level a great match for JetBlue in terms of expanding more on the East Coast, but the issue is that Alaska already has its hands full with the Hawaiian merger, so that might be more of a task than the airline is willing to take on at the moment
- While it’s not mentioned, I actually think American has the most to gain here, though admittedly the carrier’s balance sheet isn’t in a great position; but I think there’s a lot of upside for American, and if American had a competent and motivated management team, I think this would be a brilliant power play
Frankly, I think even the suggestion that this is being explored could have huge implications for the possibility of a merger, on the simple grounds that this will become a competitive game. Even if United wasn’t necessarily committed to buying JetBlue, United’s management most definitely doesn’t want another airline acquiring JetBlue. So we’ll see how this plays out, but I think it could be an interesting few months.
Bottom line
JetBlue is reportedly exploring the possibility of a merger, with advisers looking at United, Alaska, and Southwest, as the most likely partners. United seems like the obvious choice here, in terms of what the company’s management team has been saying for so long. However, United may also face the most regulatory hurdles (unless the endless compliments of Trump finally pay off).
I’m not sure if United wants to buy JetBlue, but there’s one thing I’m certain of — United doesn’t want another airline to buy JetBlue. While it’s not mentioned, I believe that American has the most to gain with a JetBlue merger, though I wouldn’t trust the current management team to actually be able to execute on that.
What do you make of this potential JetBlue merger situation?
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