About six weeks ago I noted that while JetBlue is in talks with a variety of airlines about partnerships, aviation watchdog JonNYC noted that United was poking its nose around for opportunities. In response, United filed an SEC 10-K saying they’re not in talks about a merger with JetBlue. But they didn’t deny other potential arrangements (or that talks might occur in the future).
At an investor conference this week, United Airlines CEO Scott Kirby was asked whether United might buy another airline? “JetBlue is the obvious candidate” and don’t ask me, go ask JetBlue!
Kirby spoke at the J.P. Morgan Industrials Conference and JonNYC flags this exchange about airline mergers.
Excluding Spirit and Frontier, will we see or and or do we need more industry consolidation? And does United play a role in it?
Scott Kirby, CEO, United Airlines: I don’t know. I think it’s I probably think it’s less likely than others think. JetBlue is the obvious candidate. Joanna is going to be here later today. So you can ask her what she thinks.
…It’s possible. But there’s a lot of challenges, like I look at it from United’s perspective. We have a great plan that is working and mergers are so hard. They’re disruptive.
Your technology team spends two years on the sideline just integrating like I bet a lot of you use the United app. I bet you all think it’s the best app in the world in airlines because it is. Like that kind of investment just gets harder to do. We got some super cool stuff coming for customers this year. That stuff just gets harder and harder to do.
And at United, well, when the business plan is working, like the hurdle to go do it, we don’t need a deal for sure. The hurdle to go do a deal gets a whole lot higher.
That said, at least at United, I would like to have a bigger I’d like to have a presence on the other side of the river at JFK. But man, all the headache, all the brain damage of buying a whole airline to get that, that’s a lot to do. So, yes, really, I think the ball is going to be in JetBlue’s court.
…They’re also an airline that focuses on brand loyalty. So from the customer perspective, they have a lot of those sort of core DNA things that are expected there. Also competing with another airline, JFK and Boston that has that too.
So it’s a tough position for it to be in. So it’s sort of their decision on how to sort through that. That’s the only one that I think really is potentially in play one way or another.
A long shot but an insightful answer. JetBlue has something United wants – a significant presence at New York JFK. United gave us its presence there a decade ago under CEO Jeff Smisek, saying that JFK was unprofitable but not realizing that corporate customers on the West Coast would pull their business, preferring not to fly to Newark instead. JFK has the bulk of international with United’s partner carriers, and JetBlue would mesh well. There have also been rumors of United wanting a more substantial Florida presence which JetBlue has.
Yet mergers are hard, expensive and a distraction. So the question is, what would it cost? Would it get approved or dragged through the courts? And would the juice be worth the squeeze?
I’m surprised that Kirby answered the question, but it’s the most interesting airline CEO to listen to because he generally doesn’t pull punches, and he’s insightful about the industry. He lays out his beliefs clearly. They’re not always what Wall Street wants to hear and they’re not always right but he’s got a firm thesis about the world and his industry works and doesn’t hold back. That makes him the most interesting airline executive to listen to.