Guys, either Scott Kirby is losing his mind, or the Trump administration likes “big deals” even more than we already knew.
Scott Kirby is pitching United buying American?
Bloomberg is reporting that United CEO Scott Kirby has pitched the idea of United acquiring American to senior members of the Trump administration. Per the report:
Kirby has pitched the idea to senior government officials, though it’s unclear if any overtures have since been made or if an actual process is underway to explore a deal, according to the people, who asked not to be identified because the conversations are private.
Jon Ostrower from The Air Current, also a very reliable source, confirms this news is accurate, and suggests that there has been talk of this for around a week now.
For context, in recent times there have been lots of rumors about possible airline consolidation. The wisdom seems to be that if there is going to be any additional consolidation in the airline industry, now is the ideal time in terms of getting regulatory approval (before the midterms).
The common belief has been that some sort of deal with JetBlue is most likely, both since JetBlue is looking for a merger partner, and also since Kirby has been very vocal about his interest in JetBlue. Delta’s CEO has made it clear he thinks we’ll see multiple mergers, and even the Transportation Secretary has said he’s generally in favor of consolidation. So to see the suggestion that two of the country’s three biggest airlines could merge is on a completely different level.
Let me of course emphasize that this is just a report, and that it’s anyone’s guess if any attempt is even made here. The report only suggests that Kirby has floated the idea with some senior Trump officials, and one wonders how serious this proposal even is (“wouldn’t it be funny if we bought American, haha?”).
How do we rationalize an American & United merger?
Kirby is a smart guy, and certainly also ambitious and a bit arrogant. I generally think he has a really good pulse on the industry… so I’m really surprised to see his take here.
I guess on the most basic level, I wonder if Kirby is actually serious? Does he really think there’s any chance on earth that an American and United merger would be approved? I guess under Trump one never knows, but that just seems wild to me:
- I don’t generally think consolidation in the airline industry is evil, as long as it allows airlines to scale to the point where they can fully monetize their loyalty program (whereby credit card companies are basically subsidizing airline ticket prices)
- American and United are both at scale when it comes to that, so I feel confident that a deal like this wouldn’t be in the public interest
So is there even a 1% chance that something like this would get regulatory approval? I almost feel like Kirby can’t really believe this, in which case I wonder if he might be playing 4D chess here, and there’s some angle I’m missing. Is there some incentive that he has to even create these kinds of rumors? Is it to make a JetBlue merger look small and insignificant by comparison, or…?
Or is Kirby actually this delusional? We know he used to work at American, and he loves to take revenge on the airline any way that he can. He has also gone on the record as saying that American is cooked, and can’t recover from its mistake. So from that perspective, I’m confident that nothing would bring him more joy than taking over American and making the brand disappear. But… also… c’mon.
Bottom line
United CEO Scott Kirby has reportedly floated the concept of a merger with American with Trump administration officials. I think many wondered how much regulatory scrutiny a JetBlue merger would face, but an American merger would be on a completely different level. I don’t even know what to make of this.
What do you make of Kirby’s wild merger concept?
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