TLDR
- American Airlines rejected speculation about a potential merger with United Airlines (UAL)
- Shares of AAL dropped more than 1% during after-hours trading after the announcement
- United Airlines CEO Scott Kirby allegedly presented the merger concept to White House officials in February
- The combination of AAL and UAL would form the world’s biggest airline carrier
- Transportation Secretary Sean Duffy indicated consolidation may occur but emphasized regulatory review
American Airlines forcefully dismissed speculation on Friday regarding a possible combination with United Airlines, causing shares to retreat in extended trading hours.
Shares of AAL declined more than 1% after-hours following a company statement declaring it has no involvement in, nor desire for, any merger discussions with United.
American Airlines Group Inc., AAL
“A merger with United would harm competition and consumers,” American Airlines stated, further noting that such a transaction would be “at odds with our interpretation of the Administration’s approach.”
The statement followed a Bloomberg article disclosing that United’s CEO Scott Kirby had proposed the concept of merging the two airlines to high-ranking government representatives, including President Trump, during February.
Kirby previously held the position of President at American Airlines before transitioning to United, where he currently holds the chief executive role.
The Bloomberg article does not confirm whether any official discussions are actively taking place to pursue such a transaction.
Regulatory Challenges Would Be Significant
Combining AAL and UAL would result in the creation of the largest airline company globally.
The two airlines collectively command over one-third of domestic passenger traffic in the United States, competing alongside Delta (DAL) and Southwest (LUV).
Industry observers have emphasized that a transaction of this magnitude would invite substantial regulatory examination and would probably encounter resistance from consumer advocacy organizations and competing airlines.
Transportation Secretary Sean Duffy commented on airline industry consolidation earlier this month during a CNBC interview, suggesting that opportunities exist for mergers within the sector.
Duffy mentioned that President Trump generally favors large-scale corporate transactions.
Federal Oversight Remains a Factor
Nevertheless, Duffy cautioned that any significant airline consolidation would undergo evaluation concerning its effects on fare pricing and marketplace competition.
He indicated that merging companies would probably be required to sell off specific operations if two major airlines joined forces, in order to avoid excessive market dominance.
American Airlines’ public statement seemed to explicitly acknowledge these regulatory challenges, characterizing a United merger as incompatible with competition regulations.
Shares of UAL had risen 7.12% earlier during the week, potentially driven by merger-related speculation, while AAL had increased 4.16% over the same timeframe before Friday’s after-hours decline.
As of 6:09 PM ET on Friday, AAL had retreated as investors responded to the airline’s definitive rejection of merger possibilities.
