We know that if regulatory approval weren’t an issue, United would’ve already bought JetBlue, given the Chicago-based carrier’s desperation to get onto Delta’s level financially, and to return to New York Kennedy (JFK).
For the time being, JetBlue and United have a partnership that’s growing over time, though it’s pretty clear to most people that the long term hope is to actually buy JetBlue. Along those lines, we haven’t heard much commentary from United executives lately about possible mergers, though here’s an interesting update…
United CFO thinks industry would benefit from mergers
Live and Let’s Fly flags how United Airlines Chief Financial Officer (CFO) Michael Leskinen spoke at the Barclays 43rd Annual Industrial Select Conference this week. While being interviewed, he was asked “what should United do with excess cash, bolt-on M&A, larger M&A, share repurchases, dividends, debt paydown, or internal investment?”
He responded by saying “that’s a good question,” and then the interviewer followed that up by saying “M&A has been a topic at this conference, not specific to airlines, but how do you feel about the environment right now, especially as you’re talking about low-margin airlines having to face economic gravity?”
Leskinen responded by saying “I think it’s a unique environment where M&A is possible, we’ll see how that plays out, but I do think that this industry would benefit from some.”
Now, one might be tempted not to read too much into this. After all, most airline executives believe consolidation is good for the industry. However, what’s interesting is specifically the line about how he thinks it’s “a unique environment where M&A is possible.”
M&A has long been possible in the airline industry, without being blocked. Let’s be clear, while the Biden administration blocked the Spirit and JetBlue merger, they didn’t block the Alaska and Hawaiian merger. For that matter, we’re currently seeing Allegiant acquiring Sun Country, and I don’t think any administration would block that deal.
So it seems clear that Leskinen’s comment must be referring to a type of deal that wouldn’t otherwise be approved, outside of this “unique environment.”
I have to imagine something will happen sooner than later
It’s hard to imagine that United isn’t ultimately planning on making a bid to acquire JetBlue, and the current phased partnership is a “foot in the door” approach, to ultimately convince regulators “see, a merger is only one step further.”
The thing is, the clock is also ticking. We’re now over a year into Trump’s second term, and these deals also take time to get approved. So I have to imagine that if United plans to make some sort of bid for JetBlue, it’ll happen within the next couple of years. For that matter, it sure seems like it’s a case of “the sooner, the better.” In other words, I can’t imagine the odds will be getting any better as time goes on. United CEO Scott Kirby has been vocal about his support for Trump, so he’s certainly “saying all the right things” (in terms of staying on Trump’s good side).
A few months back JPMorgan analyst Jamie Baker made the case for a JetBlue acquisition, arguing that’s more likely than the airline ultimately filing for Chapter 11 bankruptcy. Among other things, he pointed out how United and JetBlue combined would only have as much domestic market share as American and Delta each do.
We’ll see how this all plays out, but logically speaking, if United were to bid on JetBlue, you can’t help but wonder if other competitors might give it a shot as well:
- If we were playing “airline matchmaker,” a combination between Alaska and JetBlue is most logical, in terms of creating a national competitor; however, Alaska has its hands full still working on the recent Hawaiian acquisition, which has been challenging
- If American had a leadership team with a vision, I think the real power play would be for American to acquire JetBlue, and become a strong, focused competitor in the Northeast; even if you combine the market share of American and JetBlue, the combined airline would still have a smaller presence at New York City airports than Delta does
Bottom line
United Airlines’ CFO made some interesting comments about airline mergers this week, saying that he thinks that “it’s a unique environment where M&A is possible,” and he does “think that this industry would benefit from some.”
What’s interesting here is that M&A in the airline industry is possible under all administrations, it’s just a function of how good the deal is for competition (by some metric). One would have to imagine he’s referring to deals that might not otherwise be approved, and in the case of United, it seems pretty clear what this could be referencing.
We’ll see how this all plays out, though I have to imagine that 2026 will finally be the year where an airline makes a bid for JetBlue (or perhaps even more likely is that we see a bidding war).
What do you make of the comments of United’s CFO, and how do you see this playing out?
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