United-American mega deal pitch pushes up shares; antitrust concerns loom

A potential deal between United Airlines and American Airlines will create an industry behemoth and invite extraordinary scrutiny from regulators, labour unions and consumer advocates, all wary of higher fares and reduced competition. United Airlines CEO Scott Kirby floated a potential merger of the two carriers to US President Donald Trump in late February, according to two sources familiar with the matter, but industry officials were quick to highlight the formidable antitrust obstacles such a deal would face. The details of Kirby 's proposal were not immediately clear. Shares of both carriers rose in early trading on Tuesday, even as airline stocks remained under pressure from higher oil prices linked to the war between Israel and Iran, which has threatened travel demand. American shares rose 5% in premarket trading, as investors viewed a potential deal as a rare bright spot for a carrier that has struggled in recent quarters to deliver consistent profits and bring costs under control. United shares were up about 2% before the bell. American has been trying to close the gap with rivals Delta Air Lines and United Airlines, which have pulled ahead by capitalizing on strong demand for premium travel and better tailoring their products to shifts in the market. For United, a deal of this scale could provide the step-change in capacity and market share it would need to establish a clear lead over rival Delta Air Lines, which has long dominated the industry in profitability and premium revenue. Since the US-Israeli war with Iran began in late February, shares of both airlines have slid as the conflict sent jet fuel prices sharply higher, with American down 14.1% and United off 10.4%. Airlines and industry executives have warned that a prolonged period of elevated fuel costs could reshape the sector by squeezing margins, limiting capacity growth and increasing pressure on financially weaker carriers. Kirby raised the merger idea during a February 25 White House meeting focused on the future of Washington Dulles International Airport, three days before the conflict began, sources told Reuters. He argued that a combined airline would be better positioned to compete internationally, where foreign carriers account for a majority of long-haul seat capacity to and from the United States, despite US citizens making up most of those travelers. Industry officials and antitrust experts said any attempt to win approval would face steep hurdles, citing concerns about competition, higher fares, job losses and significant route overlap in a US airline market already dominated by four major carriers. United and American declined to comment, and the White House did not respond to requests for comment.