United Airlines CEO Stirred Up A Hornet’s Nest With Merger Hint

A week after a report surfaced that United Airlines CEO Scott Kirby “floated” the idea of an American Airlines/United Airlines merger with Trump administration officials, the concept doesn’t seem to have gained much support.

In fact, it seems that Kirby stirred up a hornet’s nest when he raised the topic. Airline bloggers chatted about the supposed mergers for a week, and on Monday two prominent U.S. senators blasted the industry in a joint letter. Kirby will likely be asked to explain himself on United’s earnings call on Wednesday.

Latest to dismiss the tie-up was President Trump, who spoke to CNBC Squawk Box on Tuesday morning.

Asked about reports of an American/United merger, Trump said, “I just heard it a few days ago. I know them both very well. I don’t like it, no. I don’t mind mergers. I’d love someone to buy Spirit, as an example. U know Spirit’s in trouble.”

However, Trump continued, “But with American, it’s doing fine. And United’s doing very well. know the United people. They’re doing very well. I don’t like having them merge.”

Bloomberg first reported on Kirby’s suggestion late on Monday April 26, prompting the week of merger chatter. It is not known what Kirby said, or even how serious he was when he said it, or really much of anything about it, but on Friday American put an end to the speculation.

American said it “is not engaged with or interested in any discussions regarding a merger with United Airlines” and that “a combination with United would be negative for competition and for consumers.” It added: “Our focus will remain on executing on our strategic objectives and positioning American to win for the long term.”

On Monday, two U.S. Senators, a Democrat and a Republican, wrote a letter to Kirby and Isom indicating that they oppose a merger. “A United-American air carrier would be able to exploit its market power to harm consumers in a number of ways,” wrote Sen. Elizabeth Warren D-Mass and Mike Lee, R-Utah.

Lee is chairman of the Senate Subcommittee on Antitrust, Competition Policy, and Consumer Rights.

“First, a United-American merger could lead to increased prices for consumers, at a time when airlines are already squeezing flyers through higher fares and fees,” the senators said. “In addition, a combination of United and American could likely cut routes.”

Also, they said, “A United-American merger would hurt smaller airlines’ ability to compete for critical gate access” and would also “enable the massive combined carrier to exercise monopoly power over airline workers, potentially suppressing wages and benefits industry-wide,” they said.

All in all, the letter made clear that many members of Congress don’t like the airline industry very much.

Near midday on Tuesday, American shares down 3% and United shares were down about 1%. During the past month, American shares have risen 9% and United shares have risen about 5%.