United Airlines no longer expects major merger

US carrier United Airlines remains open to buying airport slots, gates or other assets if higher fuel prices put pressure on weaker rivals, but is unlikely to pursue a major consolidation deal after its failed bid for American Airlines, according to Reuters.

United Airlines Chief Executive Scott Kirby said this month, according to Reuters: "I think consolidation is unlikely for United. That doesn't mean we won't be in the market for asset acquisitions, but consolidation is a low probability.”

Kirby said in April that American Airlines had declined to engage in a deal after being approached about a merger. American Airlines CEO Robert Isom has rejected such a merger, calling it anti-competitive and harmful to customers.

Scott Kirby did not share Robert Isom's opinion. The United Airlines official believes that the merger would have benefited consumers, but noted that such a large and unconventional transaction could not have been completed without the support of American Airlines management.

The head of United Airlines believes that unions, shareholders and customers would have supported the merger. However, public opposition from American Airlines management prevented the transaction from taking place. "There is no way that the management team would publicly say that the deal is anti-competitive," Kirby stressed.

Asked whether United Airlines has abandoned the idea of a deal with American Airlines or could return later, Kirby said that any deal requires "a willing partner."

Currently, fuel prices are testing airlines' margins and widening the gap between larger carriers with strong names and weaker rivals, Reuters notes.

Kirby said United Airlines expects higher fares to keep the airline on track to recover the full impact of higher fuel prices later this year. The carrier said demand for travel has remained strong, although United Airlines expects the higher fares to eventually have some impact.

Several airline executives have said the fuel price shock is separating the stronger carriers from the weaker ones. Kirby portrayed the divide as one between airlines with loyal customers and those that compete largely on price.

The airline's spokesman rejected criticism from Willie Walsh, head of the International Air Transport Association (IATA), that large U.S. carriers are squeezing out competition. Kirby said United Airlines and Delta Air Lines are winning because they have invested in brands and products that travelers value.

"Customers care about technology, service, reliability, product,” Kirby said, noting, "They want a great experience. They don't just want a seat.”

Kirby also said United Airlines' advantage lies less in its balance sheet and more in its operating profit, which allows the company to continue to invest while some similarly sized rivals are barely breaking even.

Asked whether JetBlue Airways would become a more attractive target for United if JetBlue were to enter bankruptcy protection, Kirby said he found that scenario unlikely, citing JetBlue's cash and unencumbered assets.