By Rajesh Kumar Singh and Nandan Mandayam
CHICAGO, May 27 (Reuters) – United Airlines CEO Scott Kirby said on Wednesday the carrier does not expect to pursue airline consolidation for the foreseeable future, weeks after American Airlines rebuffed his approach for a potential merger.
Speaking at a Bernstein investor conference, Kirby said he had long believed that only the “big transaction” United tried to pursue made economic sense for the carrier, while other potential deals did not.
But he said that transaction required a willing partner, “which we clearly don’t have.”
“So I don’t think that United at least is going to participate in any consolidation for any time I can see in the foreseeable future,” Kirby said.
United said in April that American had declined to engage after Kirby approached the rival carrier about a potential merger. Reuters previously reported that Kirby raised the idea of a combination with American during a meeting with U.S. President Donald Trump in late February, raising the prospect of the biggest U.S. airline consolidation move in more than a decade.
American CEO Robert Isom rejected a tie-up as anti-competitive and bad for customers, saying the two carriers would be “roommates” in Chicago but were “not getting married.”
Asked about investor speculation that United could pursue a smaller deal after failing to secure a larger transaction, Kirby called the idea “idiotic” and said that was “definitely not the plan.”
He also pushed back on speculation about JetBlue Airways, saying United would have to improve JetBlue’s margin by about 25 percentage points to make a deal work, which he called “mathematically close to impossible.”
The United CEO said ultra-low-cost carriers are likely to become “materially smaller” as high airport costs and competition from larger airlines force them to retreat to markets where their business model works. He said discounters had expanded outside their profitable niche and would need to shrink back to leisure routes where they can make money.
MARGINS IN FOCUS
Kirby also said he is increasingly confident United can reach double-digit pre-tax margins next year, as easing oil prices and resilient demand help it recover more of the hit from higher fuel costs. He said United was on track to deliver double-digit margins this year before the Iran war drove up fuel prices.
He said United expects to recover a little less than 50% of the fuel hit in the current quarter, but lower oil prices had reduced the hurdle to full recovery. Kirby said United had not seen a meaningful pullback in demand after fare increases, though he said some price sensitivity was still likely.
United has pulled some capacity where flights would burn cash, Kirby said, but has not changed its broader strategy.
(Reporting by Rajesh Kumar Singh in Chicago and Nandan Mandayam in BengaluruEditing by Nick Zieminski)
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