I sense a growing fever pitch for consolidation in the U.S. airline industry, and now a key member of the Trump administration is signaling openness to it.
Transportation Secretary Sean Duffy Signals Openness To Airline Mergers, Says “Trump Loves To See Big Deals Happen”
As flagged by One Mile At A Time, U.S. Transportation Secretary Sean Duffy has indicated that the Trump administration may be open to additional airline mergers, suggesting there is “room” for further consolidation in the industry.
In an interview on CNBC yesterday, Duffy was asked whether he would support a scenario in which one of the “Big Four” U.S. airlines (American, Delta, United, or Southwest) were to acquire a smaller carrier.
His response:
“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…
“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.”
Duffy also suggested that any merger involving larger airlines could require divestitures, noting that carriers might need to “peel off some of their assets” to address competition concerns.
“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.”
Here’s the clip if you care to watch it:
A New Era Of Airline Consolidation?
While Duffy stopped short of endorsing any specific transaction, his comments signal a notable shift in tone compared to the Biden years, when his DOT predecessor Pete Buttigieg and regulators took a far more aggressive stance against airline consolidation.
Under the prior administration, high-profile merger attempts, including JetBlue’s proposed acquisition of Spirit Airlines, were blocked on antitrust grounds. The messaging now appears to be more open-ended: mergers may be possible, but will be evaluated on a case-by-case basis, with attention to pricing, competition, and broader industry dynamics.
Of course, the Department of Transportation does not have sole authority over airline mergers. The Department of Justice ultimately plays the central role in reviewing and approving (or blocking) domestic airline consolidation. But I think we know who the puppet master is in this administration….
The U.S. airline industry is already highly consolidated, with four major carriers controlling roughly 80% of the domestic market. At the same time, there has been renewed speculation about potential deals, particularly involving smaller carriers like JetBlue or Spirit, as airlines face rising costs and shifting competitive pressures. The massive spike in oil price since the war in Iran began has only added fuel to the fire.
Duffy’s comments suggest that the Trump administration will not block a JetBlue merger, which I view as a race between American Airlines and United Airlines (even though I’d still love to see Alaska Airlines and JetBlue merge).
> Read More: JetBlue Actively Simulating Merger Options With Alaska, Southwest, And United Airlines
> Read More: United Airlines CEO Says JetBlue Merger Is “Up To Them”…But He’s Holding All The Cards
CONCLUSION
It’s far too early to say whether any specific airline merger will move forward, but the tone from Washington appears to be shifting…and that is hardly a surprise.
For now, the Trump administration is only signaling openness to airline consolidation, even as it emphasizes that any deal would still face scrutiny. Still, now strikes me as the ideal time for consolidation (not that I personally support it). I expect we’ll see a play for JetBlue and potentially for Spirit by the midterm elections.
image: Trump flanked by Duffy and FAA Administrator Bryan Bedford (White House)
Kirby’s revenge. . .United buys AA! That would be something!
Might as well merget them all and call it “Buy N Large Airlines.” because that’s where we are heading as a society.
We are becoming post-Soviet Russia… American Aeroflop.
Singapore Airlines should acquire and rebrand American Airlines, ha!
Singapore Airlines provides indescribable Customer Service!
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 which is 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 1st AND 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.
Alaska purchases American Airlines would be a big deal, yet with little anti-trust concern as the two airlines’ route network has few overlaps.
If so, the new airline should be called TWA.
I expect Jet Blue will be acquired . . . . by whoever wants them most. My take on the suitors –
Delta – not an interested suitor and would face antitrust headwinds at JFK and BOS.
United – “wants” a reentry to JFK, but I expect even the Trump DOJ/DOT would require a major divestment – perhaps in favor of AA, which would drive Kirby nutty.
Alaska – a good match. Some think that AS is like a python which just swallowed a gazelle and still digesting. True, but there is no law which interferes with an acquisition, continuing to operate Jet Blue as a standalone entity and slow rolling integration. Geographies are fantastic, but AS may need more widebodies, and more premium seats on those widebodies – premium seating on those Hawaiian widebodies is pretty sparse.
Southwest – nope. Southwest has demonstrated that it is content to grow organically and pretty much never pay a premium to grow – was Morris Air its only acquisition? Nor is there any demonstrable interest in premium services. I exoect Southwest will continue to grow, but organically and incremenally. Such generally flies under the antitrust radar.
American – Wants some BOS, needs some JFK, but has no $$$. Financing can be had for a price, but an all stock deal might be more attractive than the cost of financing. The FLL hub connecting to the Caribbean and Latin America could be a true issue, but I do not know that there would be a finding of a meaningful barrier to entry to those markets. And as most of the traffic seems to be connecting traffic, Delta, United, Southwest and even Spirit are to be viewed as viable competitors who can enter is they so choose. Two ironies – UA could take over much of the FLL hub in a divestment and AA would find itself with the SJU hublet it abandoned some time ago. AA might have to part with some slots at DCA, but now that Billy Bishop has customs preclearance, I would not mind finding a Porter tail there.
Selling Jet Blue in pieces – a complicated transaction, but if the point is geographies which avoid antitrust issues and particular aircraft, it is possible. I would hafta wonder how, if at all, True Blue can be divided up if at all. Rather, an acquirer of a part would hafta price in the goodwill of the Jet Blue customer base in the geography/equipment which is subject to a partial sale.
Southwest acquired Airtran