United Airlines chief executive Glenn Tilton says it’s time for airlines to merge, and he wants United to take part in that consolidation.
Tilton, speaking at an airline investor conference in New York on Thursday, did not say which airlines he expects would combine. Nor did he say whether United would be an acquirer or be acquired.
He compared the airline industry to telecommunications, where Verizon plans to buy MCI and SBC is acquiring AT&T.
“Just as telecom is plagued with overcapacity and commoditization, so is the airline industry, which must follow and consolidate,” Tilton said.
He said after United emerges from Chapter 11 bankruptcy, the company will be in a position “to participate in a consolidating market if it were to happen.”
“Somebody is going to aggregate the industry, and I think some combination of originating assets makes more sense than others,” Tilton said. “And I think our combination of original assets is a fine combination, probably the best in the business.”
He was asked why he would use the post-bankruptcy period to “potentially go on the offensive, be the acquirer.”
He said the “the market has no space, in my judgment, for six network hub-based legacy carriers,” and the industry is “brutally competitive.”
But some analysts are doubtful about the wisdom of airline consolidation.
Ray Neidl, an analyst with Calyon Securities, agreed that “there’s too many airlines,” but said, “Airline mergers are very bad.”
If permitted, partnerships such as code-share agreements might be more logical, “and if that doesn’t work, liquidations would be the next logical thing.”
United’s attempt to merge with US Airways failed in 2001 after antitrust regulators raised concerns.
Tilton said he thinks government might take a different view now, saying prices are no longer set by “legacy” carriers such as United. Although employee unions historically have opposed airline mergers, Tilton said, labor is becoming “more and more aware” of challenges the industry faces.
If the airline industry is not able to consolidate, “then this company has done the work to be the company that it will be on its own,” Tilton said.
Staff writer Kelly Yamanouchi can be reached at 303-820-1488 or kyamanouchi@denverpost.com .
