The airline industry is abuzz with the prospect of a mega-merger, and the key player in this story is none other than President Trump. The idea of a merger between United Airlines and American Airlines has been making the rounds, with United CEO Scott Kirby reportedly pitching the idea to Trump during a meeting last month. But what makes this story truly fascinating is the broader context in which it unfolds.
In my opinion, this development is a significant shift in the dynamics of corporate America. The traditional model of seeking antitrust approval from the Justice Department (DOJ) is being disrupted. Many top DOJ officials and prosecutors have either been forced out or resigned this year, after pushing back against proposed settlements in high-profile cases like Live Nation and Ticketmaster. This has led to a new approach for lobbyists, who are now going directly to senior DOJ leadership, or even more ambitiously, to Trump himself.
This change in strategy is particularly intriguing, as it marks a departure from the past. During Trump's first term, this kind of direct engagement with the president was not the norm. However, it seems that this approach is now paying dividends, as evidenced by the 53% increase in U.S. merger and acquisition activity this year. It's as if big business is saying, 'If you want our business, you need to come to us.'
The potential merger between United and American is a powerful example of this new dynamic. These two airlines are already among the largest in America, and a merger would give them a market share of over 34%, dwarfing the current leader, Delta, which has a 17.8% share. This raises a deeper question: What does this mean for competition and consumer choice in the airline industry?
One thing that immediately stands out is the potential impact on prices. With such a large market share, the merged entity could potentially set prices without fear of antitrust scrutiny. This is a concern that has been raised in the past, particularly in the case of JetBlue's failed attempt to acquire Spirit Airlines in 2023. The DOJ successfully argued that the merger would lead to higher prices and reduced choice, and it seems that this fear is not unfounded.
However, what many people don't realize is that the airline industry is already highly consolidated. The top four airlines in the U.S. control over 70% of the market, and the top eight control over 85%. So, while a merger between United and American would be significant, it might not be as disruptive as it initially seems. In my view, the real question is whether this new approach to antitrust approval will lead to more mergers and acquisitions, and what that means for the future of competition in the airline industry.
From my perspective, this story is a fascinating insight into the changing dynamics of corporate America. It raises important questions about the role of antitrust enforcement, the power of lobbyists, and the future of competition in a highly consolidated industry. As the airline industry continues to evolve, it will be fascinating to see how this new approach to mergers and acquisitions plays out, and whether it will lead to a more competitive landscape or a further consolidation of power.
