Speculation Swirls Over Possible United–American Merger: How Likely Is It?

New York City, The Financial News — Lee Byung-chulAs talk grows about a potential mega-merger between United Airlines and American Airlines, attention is turning to how such a deal could reshape the airline industry landscape. However, most analysts believe the chances of it actually going through are low, given antitrust hurdles, political factors, and the current market structure.
According to foreign media reports on the 14th local time, United Airlines Chief Executive Scott Kirby is reported to have floated a merger proposal with American Airlines to the Trump administration earlier this year. If completed, the deal would create the world’s largest airline by a single measure.
The main obstacle is regulation. The big four U.S. airlines, including United and American, currently control about 80% of the U.S. domestic market. A merger of the two carriers would give the combined airline roughly a 40% market share, which would inevitably face intense antitrust scrutiny.
Many experts see the odds of a merger as slim. George A. Hay, a professor at Cornell University, told CNBC, "It would be the largest deal of its kind in history, but the chances that a court would approve it are essentially zero."
Market reaction has also been muted. American Airlines’ share price did rise on news of the merger talks, but analysts say this was largely a short-covering bounce rather than a reflection of genuine expectations that the deal will happen.
Valuation is another sticking point. American Airlines is likely to argue that its shares are worth more than 20 dollars each, but critics say that is unrealistic once its heavy debt load is taken into account.
Route overlap is seen as a key stumbling block. The two airlines currently compete on roughly 289 routes, and a merger could reduce the number of rival carriers on those routes to just one or two, making large-scale asset sales all but unavoidable.
Policy, however, remains a wild card. The Trump administration has generally taken a relatively friendly stance toward large mergers and acquisitions. United States Department of Transportation (USDOT) Secretary Sean Duffy has also said that "there is room for consolidation in the airline industry," leaving the door open to the possibility.
The merger discussion has emerged amid broad cost pressures across the industry. Jet fuel prices have been rising in the wake of the U.S.–Iran conflict, prompting airlines to cut capacity, and this is widely expected to feed through into higher fares.



pride@fnnews.com Lee Byung-chul Reporter