Make of these comments what you will, but I really think things could heat up in the very near future…
In this post:
Trump’s Transportation Secretary comments on airline mergers
On CNBC today, United States Transportation Secretary Sean Duffy was asked to comment on how there’s growing chatter about one of the “big four” US carriers potentially acquiring another airline. Specifically, this was in the context of the bulk of the industry profits being with two airlines, and the oil price situation making things even worse for airlines.
Here’s how Duffy responded:
“That’s going to come through us, but also President Trump loves to see big deals happen, he would have to review that kind of a deal, it has to go through DOJ, it’ll come to DOT. I think, who knows who’s going to match up, right? There’s always chatter, but is there room for some mergers in the aviation industry? Yeah, I think there is.”
He was then interrupted to confirm that this was in reference to consolidation in the United States, and then he continued as follows:
Yeah, yeah, I think so. Again, there’s a lot of chatter, and a lot of people talking amongst themselves about what that should look like. I’m going to see, is there a deal that’s brought to the table, how does it look, what impact does it have on competition, what is it going to do for the consumer, what is it going to do for us to be competitive globally, to make sure we have the biggest and best airlines competing around the world.”
He was then asked a follow-up question about market share:
“But what if that means one of the airlines no longer has 20%, the big four all around 20% market share, what if they go up to 30%, 35%, would you be okay with that?”
He then responded as follows:
“We’d have to look at it at a case-by-case basis, and if there was a merger between some of the larger airlines, they’re going to have to peel off some of their assets, we don’t want to have this massive infrastructure with one airline in America.”
How much should we read into Duffy’s comments?
Admittedly Duffy isn’t the primary person responsible for deciding whether or not an airline merger gets approved. So everyone can decide for themselves to what extent he’s just sharing his own opinion, vs. something that reflects discussions he has had with Trump.
My impression based on the above is certainly that Duffy is very open to consolidation, even it it includes one of the “big four” US carriers, with the caveat that some concessions might need to be made.
It seems highly likely that if there were any consolidation activity in the near future, it would involve JetBlue, as the airline is reportedly looking at being acquired. JetBlue is an airline with a lovely passenger experience and it could add huge value to another airline group, but it’s just set up to fail based on its current reality (JFK just isn’t a great airport to be based at if you’re primarily operating domestic flights).
JetBlue, meanwhile, would add such value as part of a larger airline group, like belonging to American or United. United CEO Scott Kirby hasn’t been secretive about his interest in acquiring JetBlue, though he does sometimes send mixed signals (one day he’ll say that “the ball is going to be in JetBlue’s court” when it comes to a merger, and the next day he’ll say he has no interest in a merger).
I do have to imagine that this is going to get interesting very soon. If United is interested in acquiring JetBlue, or if it at least wants to make sure that no competitor gets JetBlue’s most important assets, then I have to imagine this is the time to take action:
- Kirby has been very pro-Trump, and has certainly been saying the right things to get favor with him
- From a regulatory standpoint, it seems like there’s no time like the present, since it seems like there would be the least regulatory scrutiny before the midterms
- It seems that the bump in oil prices gives the perfect opportunity for an airline to claim that a merger is now a matter of survival more than anything else
I don’t know how this is going to play out. I think this is too much for Alaska to take on right now, given that it’s still integrating with Hawaiian. I think a Southwest merger makes almost no sense. I know United is sort of desperate for JetBlue, even though I question the obsession with JFK. But really I think American needs JetBlue more than any other airline, and it would be the most pro-consumer deal. The issue is American’s poor financial situation.
So we’ll see if anything happens. I’m starting to think that we’re at the point where something should happen soon, and if it doesn’t, then I think it’s indicative of no deal happening with JetBlue.
Bottom line
Transportation Secretary Sean Duffy was asked about the possibility of further consolidation in the US airline industry. He said that he thinks there’s merit to further consolidation (including one of the “big four” carriers taking over a smaller airline), and also mentioned how Trump likes big deals.
So while he’s not the final judge on any industry consolidation, I’d say that’s a pretty pro-consolidation approach for him to take.
What do you make about Duffy’s comments on consolidation?
Yet the Northeast Alliance was tossed a couple years ago. I don’t get it.
Alaska "Proudly All Boeing" Airlines would have trouble absorbing Jet Blue's all-Airbus fleet.
United would benefit by doing so.
Please do not make this blog the cry room for terminal victims of TDS. Take it to MS Now or the Guardian please.
Go see a chiropractor - probably twisting yourself in knots licking 47’s boots
UA will cherry pick B6 assets and dominate the entire NYC market. AA will stumble along on autopilot. AS will retrench, go back to its strengths and rule the I-5 corridor. DL will still be too busy patting themselves on the back and bleeding red ink in places like AUS and SEA to notice the industry has passed them by.
hold onto those expectations.
I suspect that reality will prove a whole lot different.
B6 has $7.25 billion in net debt which is 40% of what UAL has on a much larger network.
No one is going to pick off a few assets unless they pay significantly for them or B6 goes through bankruptcy first.
The reason why Kirby has repeatedly only said he wants parts of B6 is precisely because of that...
hold onto those expectations.
I suspect that reality will prove a whole lot different.
B6 has $7.25 billion in net debt which is 40% of what UAL has on a much larger network.
No one is going to pick off a few assets unless they pay significantly for them or B6 goes through bankruptcy first.
The reason why Kirby has repeatedly only said he wants parts of B6 is precisely because of that reality.
AA is actually probably the most vulnerable to some sort of decision by competitors to carve it up. They have $30 billion in net debt which is almost as much as DL and UA combined - but AA has far more assets and generates far more revenue than B6 relative to the size of debt.
AS has $5 billion which still is alot compared to DL and UA adjusted for size.
The financial winner in all of this could be WN which has less than $3 billion in net debt.
Some people might be surprised if it is actually WN that sets the pace of consolidation.
of the big 3, DL has the earnings and balance sheet strength (DL and WN are the only 2 US airlines with investment grade balance sheets) while WN has the stronger balance sheet but, so far, weaker earnings.
and let's also not forget that B6 is not the dominant carrier in any of its hubs except perhaps FLL now; if UA thinks that AA can't compete in Chicago because of AA's size, it is hard to understand how some think UA will succeed at BOS and JFK as well as LGA against a much larger DL. and let's not forget that most of B6 flights don't make money based on B6 costs so they will be even less profitable for UA unless fares go much higher which means they lose passengers.
Legacy and lower cost carrier mergers don't happen because they don't work.
DL's CEO just said on their earnings call that they expect consolidation to take place in the industry and noted that DL led the last round with its acquisition of NW. DL noted that most of the capacity in the US airline industry does not cover its cost of capital. AA does not even have any stockholder equity - which means stockholders would have to subsidize a breakup of the company at current finances.
The...
DL's CEO just said on their earnings call that they expect consolidation to take place in the industry and noted that DL led the last round with its acquisition of NW. DL noted that most of the capacity in the US airline industry does not cover its cost of capital. AA does not even have any stockholder equity - which means stockholders would have to subsidize a breakup of the company at current finances.
The refinery contributed very little in the 1st quarter - just 6 cents/gallon but will benefit much more in the 2nd quarter and as long as fuel remains elevated but in line with what DL said a couple weeks ago.
If DL swings to a loss in the 1st quarter when fuel costs were not fully baked in, other carriers including AA, AS and B6 will be much more in a world of hurt in the 2nd quarter and beyond. UA's profits will be reduced even further.
Consolidation will be driven by the companies that have the means to participate in it.
While UA's profitability is second in the US, they have loaded themselves up with enormous commitments that will make it very difficult to take on money losing airlines or those airline's debt.
If DL talks about consolidation, they are talking about significant growth of their network - not just acquiring parts of the sixth largest airline.
UA will be able to swallow large portions of B6 only if B6 goes through bankruptcy first or be limited to fairly small amounts of B6 that will be eclipsed by larger deals.
Why do a lot of you think Southwest isn't going to happen because it doesn't make sense.
Coming from an administration that doesn't make sense on what it does.
This puts Southwest in the lead as a prime candidate.
He loves big deals because he has a small...
With all the airline mergers over the past 20 years why is it airlines lose money on coach fares? Why do we have three airlines losing money and struggling to stay alive? What's more are the number of people commenting that have no idea of the CBA. Back in those days try getting today's fares adjusted for inflation.
I think a lot of people and analyst underestimate the power of the state Attorney General. I can virtually guarantee you that Andrea Campbell (MA) and Tish James (NY) would not be happy and do anything in their power to make sure it does not go through Just because the DOJ won’t sue, state AG is absolutely can
that is certainly true but states have never achieved blocking a US airline merger but only in extracting concessions and asset divestitures- which the DOT secretary said would likely be the case anyway.
the process look very different if you start carving up weaker carriers.
Note that DL just reported its 1st quarter margin down slightly despite much higher fuel costs but MRO and other revenue is up significantly. DL still expects a healthy but...
that is certainly true but states have never achieved blocking a US airline merger but only in extracting concessions and asset divestitures- which the DOT secretary said would likely be the case anyway.
the process look very different if you start carving up weaker carriers.
Note that DL just reported its 1st quarter margin down slightly despite much higher fuel costs but MRO and other revenue is up significantly. DL still expects a healthy but reduced earnings for the 2nd quarter. Other airlines including AA, B6 and the ULCCs are probably not going to be profitable this year at all - and that might also be true for AS. If UA is profitable, it will be much smaller.
and note also that UA's earnings will not follow DL's by a week as it almost always does - but will be buried in the same week as AA and WN - hardly the place to distinguish oneself from the rest of the industry.
And UA is up 12% on the ceasefire news. Markets don’t care about projections today, macro > micro.
DAL stock is performing far better than over the past month and over the past year.
airlines that are far more exposed to fuel cost increases - including UAL - have taken bigger hits since the war broke out and will bounce back as hostilities die down.
But no one realistically expects that fuel will go back down quickly which means that DAL could easily have a fuel cost advantage for most of 2026...
DAL stock is performing far better than over the past month and over the past year.
airlines that are far more exposed to fuel cost increases - including UAL - have taken bigger hits since the war broke out and will bounce back as hostilities die down.
But no one realistically expects that fuel will go back down quickly which means that DAL could easily have a fuel cost advantage for most of 2026 and into 2027.
UAL's earnings guidance for the 2nd quarter is bound to be far less than DAL's not just because of fuel but also because it will cost UAL more to take capacity out - which it and other airlines have to do given that fuel is about 2X what it was 45 days ago because UAL was planning to aggressively add so much capacity.
And the same will be true on a likely even larger scale for AAL.
LUV had the most conservative capacity growth for the 2nd quarter planned.
As hard as it will be for some to accept, DL and WN will drive consolidation in 2026 if it happens. Just about everyone except UA is fair game to be the target of consolidation = in whole or in part.
UA just might not have the financial strength to lead consolidation or compete w/ someone else that has similar interests - which could be if WN is interested in B6
Let JetBlue die and let the market let others grow. Does anyone honestly need to buy it .
Give the gates back to the govt and they can sell them..
No, jetBlue should live on, by all airlines adopting its better amenities, like the most legroom in economy, free Wi-Fi, live TV on most flits, and everything tat is Mint. In many ways, I wish American, Delta, and United were more like jetBlue on those fronts. Besides, more competition is better for workers and consumers, alike.
@1990
2015 called. None of that is unique to Jetblue anymore. They're reducing seat pitch to 30" just like AA, DL, and UA
Literally no President has a higher business acumen than Trump. Though I probably would not have been in favor of a large merger, the fact that President Trump is a fan makes me feel much better.
How many bankruptcies? How many small family-owned contractors did he never pay? He paid the mob 3% on all concrete poured at his properties. The tally on foreign government contributions to his family's businesses is now approaching $10 billion.
The casino he owned went bankrupt. So much winning!
His old man had it with him. But, he pleaded with his old man, on his deathbed, to give him another chance. When his old man gave him that chance, he took the rest of the family money for himself.
Two of them, even!
Cult of personality. Trump has betrayed MAGA and America First.
Last I checked, no other President had prime Manhattan real estate gifted to him by his daddy to fall back on when all the ventures of his own design inevitably failed. And no other President was ever so in the hole they were begging shady foreign banks for loans.
The Apprentice certainly gave that impression, but reality TV is not real life.
Oh sad little Davy. I've never seen someone ratio'd so hard on this website.
Congrats sheep.
No other president has ever been accused of raping multiple 13 year old girls (in a honey pot operation run by his best "friend," who was an operative for Israeli intelligence).
“A higher business acumen” includes multiple bankruptcies?
That first sentence belongs on Jimmy Kimmel, Stephen Colbert or Jimmy Fallon. What a laugh riot.
That first sentence belongs on Jimmy Kimmel, Stephen Colbert or Jimmy Fallon. What as laugh riot.
Concept… m
Utually………………United B6
Assured…………..American ?
Destruction…….Delta ?
Unfolding
Last man standing is not a good position to be in is it. Will legacies have the last laugh with WN?
Alaska-AA makes sense, which would leave Delta as a firm #3 and last man standing.
Delta will get a much bigger presence in Texas out of all of this - and won't just come from building a hub in Austin
Tim
you have some dumb replies but this is up there. Are you suggesting a Delta/Southwest merger? because that's about the only way an article about mergers would benefit Delta in Texas. And you're probably the only one that thinks that would ever happen.
you are the only one that is delusional if you think that DL will sit out a round of consolidation if the DOT is offering its blessings on the whole exercise.
and you do forget that AA is by far the weakest of the big 4 and that has been true for over a decade.
and AA happens to operate a pretty large hub in Texas.
Let's not jump to conclusions - anyone -...
you are the only one that is delusional if you think that DL will sit out a round of consolidation if the DOT is offering its blessings on the whole exercise.
and you do forget that AA is by far the weakest of the big 4 and that has been true for over a decade.
and AA happens to operate a pretty large hub in Texas.
Let's not jump to conclusions - anyone - but the repeated calls for AA leadership to be replaced might come true if AA, not B6, is the one carved up. Other than CLT, there is far less overlap by hubs or near hubs between DL and either AA or WN than there is between UA and B6.
noted. You can't back up literally anything you said. Typical of you and very on brand to just say random things with no backing.
Actually several months ago I said there could be a scenario where Delta and SW might hookup. Delta knows that Texas is growing, increasing in both population and corporate relocations. WN would give them a dominant position in Austin and unique access to Houston and Dallas through Hobby and Love Field. A lot would have to happen first, mainly UA and AA finding other dance partners and Delta would need to make a large contribution...
Actually several months ago I said there could be a scenario where Delta and SW might hookup. Delta knows that Texas is growing, increasing in both population and corporate relocations. WN would give them a dominant position in Austin and unique access to Houston and Dallas through Hobby and Love Field. A lot would have to happen first, mainly UA and AA finding other dance partners and Delta would need to make a large contribution to the Trump Presidential Library, but it could happen.
I could see American acquiring Alaska and Southwest acquiring Frontier.
American would then have fortress hubs in Dallas, Charlotte, and Seattle.
Southwest then would have hubs in Baltimore, Denver, Orlando, and Las Vegas.
In all seriousness, there is a pathology at work. He has something like an addiction to doing deals. His policy choices to disrupt existing frameworks seem to be calculated to precipitate deals. Not concluding with a deal is like a junkie not getting his fix. And, ultimately, the junkie will do most anything to get that fix. An adversary could use this to the detriment of US interests.
Like the one Trump tried to force on Iran?
He went with the ole ‘just two more weeks’… anyone want some hot sauce for their TACO?
And let me say Southwest is not what I consider a two cabin carrier despite what they're installing
Alaska JetBlue please - we really could use a fourth strong two cabin carrier
Obviously Trump and his buddies are going to buy JBLU calls 15 mins before any merger is announced, and 15 mins again before it’s approved
You misspelled Pelosi
Yo, both sides is a problem here (even if the president’s family grifting billions is far worse than Pelosi’s millions). Still… a Bi-partisan prohibition would be welcome to prevent insider trading. For real.
@Mantis
You misspelled Tim Moore, Ted Cruz, Lisa McClain, Pete Ricketts, Thomas Suozzi, Lisa Murkowski, Marge Greene, Shri Thanedar, Mitch McConnell, and John Kennedy.
Pelosi's not even in the top 10 for investment gains.
Of course Donald Chump wants the merger. He and his people will profit from the insider trading.