In late February, Scott Kirby entered a White House meeting that was scheduled to discuss Dulles. Gate assignments, runways, and standard operational housekeeping. The CEO of United Airlines proposed a merger with American Airlines, his fiercest and closest rival, somewhere in the middle of the agenda items. The pitch took place on February 25, three days before the Iranian conflict caused jet fuel prices to rise and gave airline CFOs another reason to be restless, according to two sources who spoke to Reuters. Whether deliberate or not, the timing is the kind of detail that causes you to pause.
Industry observers believe Kirby carefully considered his moment. American families book their summer vacations in April, comparing airfares to places like Lisbon, San Diego, and Cancún. Additionally, it’s the time when carriers assess their true pricing power. When a merger rumor enters that window, it’s not just noise; rather, it’s a signal that the markets pick up on right away. The news caused American’s stock to rise 8%. United saw a more consistent 3% increase. The majority of it was attributed by seaport analysts to short-covering rather than sincere hope that the deal would close, but on Wall Street, belief and movement aren’t always synonymous.
Travelers are hesitant because of the math. Over half of the seats at 159 airports and about 40% of the domestic capacity in the United States would be controlled by a combined United-American. That’s a near-utility rather than a competitive market. The Big Four currently control 73% of domestic traffic, and the most recent significant merger, United’s acquisition of Continental in 2012, provided us with a helpful sneak peek at what integration looks like in practice. Check-in counters experience system failures. Mismatched databases cause frequent flyer miles to vanish into thin air. By 2014, Cleveland, a former Continental center, had quietly declined. The centerpiece of the former Pan Am Pacific acquisition, Tokyo-Narita, eventually closed.
It hurts most in the mileage story, and it’s difficult to ignore the trend. United increased award prices within months of the Continental agreement. International business class partner redemptions almost doubled by 2014, with some European routes seeing increases of 33–46% prior to partial rollbacks. By 2019, the airline completely abandoned fixed award charts in favor of dynamic pricing, so your saver award to Rome is no longer a fixed figure. Regular travelers who had saved miles for ten years saw the value gradually decline. Expect the same math if a similar consolidation were to occur with American’s AAdvantage program.
Almost everyone outside the boardrooms agrees that the regulatory wall is still intimidating. George Washington University’s William Kovacic described the idea as “hopeless,” citing significant overlaps in Chicago alone, where United and American are already embroiled in a gate-space altercation at O’Hare as the FAA gets ready to reduce flights this summer. Previous mergers met the requirements by giving up slot pairs: United-Continental gave up 36 at Reagan National and Newark, while American-US Airways gave up 34 at Reagan plus 86 at LaGuardia. However, the scale of this deal is different. Simply put, there might not be enough divestitures to address the effects of consolidation at this level on competition on transatlantic and cross-country routes.
The practical impact is more difficult to ignore for travelers today than the political theater implies. The discussion alone allows both carriers to test pricing assumptions during peak season, even if the deal falls through, which it most likely will. Due to fuel costs associated with the Iranian conflict, fares have already increased. The 1.5% fare decrease between 2019 and 2024, which airline lobbyists point to as proof that consolidation benefits customers, doesn’t match the experience of anyone who has recently purchased a ticket from Newark to London.
As you watch this play out, you get the unsettling impression that the pitch was the main point. Kirby was given a hearing in the White House. The markets took notice. Rivals took notice. The message has been sent whether or not the merger occurs, and part of the solution is your summer airfare.
