United CEO Quells Consolidation Chatter, Stays Bullish On American Merger

RIO DE JANEIRO—Despite spurring a frenzy about M&A a few weeks ago, United Airlines CEO Scott Kirby doesn’t see a rush for consolidation in the US but still believes in the virtues of a merger with American Airlines.

Kirby created an enormous amount of consolidation chatter when reports leaked that he floated the idea of a merger with American to the Trump administration, which at the time seemed open to additional M&A in the US airline sector.

American dismissed United’s advances, but that didn’t stop Kirby from issuing an unprecedented public statement touting the benefits of a potential merger, noting his proposal focused on growth, customer investments and global competitiveness.

During the IATA AGM, Kirby told journalists that although he started in the position that the Trump administration would view potential mergers favorably, he now believes consolidation “can get done anyway as long as its good for customers ... You can go ask American’s customers, would they like United to buy American ... and I hear from them all the time, the answer is yes.”

Focusing on what is beneficial for customers is admittedly a different way “of looking at it than people have historically,” but Kirby describes a tie-up between American and United as “apolitical ... it doesn’t matter.”

From a practical perspective, a merger would require support from unions, customers, shareholders, regulators and the management team. “I think we can get four of those five,” but United needs the support from American’s management, “and we don’t have that,” Kirby said.

Pointing to his experience in US consolidation that included America West and US Airways and attempts at United and Delta Air Lines, Kirby warned that “you shouldn’t do deals that don’t make economic sense,” and United’s not going “to do a deal just to do a deal.”

Overall, he believes a new round of consolidation in the US is not imminent.

United’s CEO also offered views on the supply chain, explaining he has stressed to Boeing and Airbus, “don’t ever, ever, ever build an airplane with one engine option; you have to have competition.” Giving his assessment of the engine manufacturers, Kirby stated: “GE is working hard. I put them at the top of the list. I appreciate what they’re doing.”

Pratt & Whitney has had well-publicized challenges, he concluded, but the manufacturer “is sincere and genuine in their desire to want to fix them and work with us.”

“The truth is the only one that I sort of have in my doghouse is Rolls [Royce],” Kirby concluded.