The most merged airline ever was USAir, seen departing PHL in 2000. (Photo by TOM MIHALEK)
An airline investor conference on Wednesday became a merger chatter gala as executives dished on their airlines and others.
Key executives from Frontier Airlines, JetBlue Airways and United Airlines all appeared at a Barclays conference in Miami. Frontier CEO Barry Biffle was outspoken in discussing mergers and acquisitions, saying, “The industry is ripe for M&A.”
What Happens to JetBlue?
“You’ve got excess capacity and a bunch of people that have had some struggles,” Biffle said. “Everybody’s talking about JetBlue this week. The truth is yeah, everybody other than Delta and United could buy JetBlue.”
At the same time, he said, a deal “solves a lot of problems at JFK for American.
“There’s probably something there,” Biffle said. “If you want to do M&A, you should do it now.” He cited ongoing capacity reduction as well as a new administration in Washington as creating a favorable time for deals. “If you’re not going to do it now, then when are you going to do it?” he asked.
JetBlue President Marty St. George seemed specifically focused on the American partnership, known as the Northeast Alliance., which a federal judge in Boston halted in May 2023, citing a threat to competition.
At the conference, asked to identify JetBlue’s ambitions. St. George responded, “The NEA was never fully played out. Just as we were getting to the back half of the ramp, the judge struck it out.”
He referred to the ruling, “which we’ve all read in excruciating detail many times.” Regarding the NEA, he said, “The biggest benefit is on the loyalty front” and noted that JetBlue “had not really gotten to full earn and burn with American before that deal was struck down. We think there is a lot of upside. We don’t really have full global earn and burn, and that would be very helpful.”
What Happens To Spirit?
As far as Frontier’s so-far failed bid to merge with bankrupt Spirit, Biffle declared, “Obviously, we’re open to M&A. We thing it would be a good thing. We just didn’t get that one done.”
“At the end of the day, there are differences of opinion,” Biffle said. “We wish them luck.
“They’re going to end up being smaller. And that’s going to be good for us ironically but I think it’s probably bad for them over time.”
St. George said Spirit “made their cuts. They were very much focused on the legacy hubs, where they had a skimming strategy.” He said Fort Lauderdale is the only piece of Spirit “that’s going to be sustainable long term,” and “I don’t think there’s a massive tailwind from that.”
At Fort Lauderdale, JetBlue and Spirit compete. During 2024, Spirit had a 31% share, JetBlue 19%, Delta 11.6% and Southwest 11.3%, according to airport statistics.
What Happens To Southwest?
Rumors about a JetBlue acquisition or partnership have focused on Southwest. Hedge fund Elliott Management now holds 10% of Southwest stock. What do hedge funds do? On Monday, Southwest said it will cut 1,750 jobs at its Dallas Love Field headquarters, representing about 15% of its corporate workforce.
Biffle said the 15% cuts were “a real hardship on these people: it is emotionally a big deal.” But he also praised Rakesh Gangwal, chairman of the Southwest board. “Rakesh Gangwal is one of the smartest people in this business,” he said. “He is now their chairman. There’s a new sheriff in town.”
If Gangwal is willing to shed employees, then he is also willing to shed capacity, Biffle reasoned. “Once you make that decision, cutting capacity is simple,” he said. He noted that Southwest has 60 daily flights from the LA Basin to Las Vegas, when fewer flights would likely carry the same number of passengers.
United Airlines CFO Mike Leskinen seemed to refer to Southwest, although he did not name the carrier. However he twice mentioned that some airlines now operate “utilization flights,” boosting the number of seats on redeye flights. This diminishes costs per available seat miles. “They think flying will bring down unit costs,” Leskinen said. But he said the flights will lose money.
On Feb. 14, Southwest launched five redeye flights: Las Vegas to Baltimore and Orlando, LAX to Baltimore and Nashville and Phoenix to Baltimore. The carrier has said it will increase the number of redeye flights to 33 by June.
Last month, a rumor circulated that United would seek to acquire Southwest. This may be seen as an indication that with hub newspapers no longer a primary source for airlines news, the standards for publication have diminished. United formally denied the rumor.
The Three Leaders All Worked at US Airways in Crystal City
One aspect of the current merger chatter is that Biffle, St. George and Gangwal all worked at US Airways in the 1990s. More than any other carrier, US Airways engaged in mergers, starting with the Allegheny-Lake Central deal in 1968. Onetime CEO Ed Colodny presided over four mergers before retiring in 1991. Subsequently, US Airways merged with America West and later with American.
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