Shares of American Airlines fell over 3% in premarket trading on Monday after the carrier publicly dismissed speculation of a potential megamerger with rival United Airlines, even as rising oil prices and operational disruptions weighed on the broader aviation sector.
The airline issued a statement late Friday rejecting any discussions around a tie-up, pushing back against reports that United had explored the idea at the highest levels of government.
The denial came after a brief rally in airline stocks, reversing gains as market sentiment shifted over the weekend.
Firm denial underscores antitrust concerns
“American Airlines is not engaged with or interested in any discussions regarding a merger with United Airlines,” the company said, adding that such a combination would be harmful to competition and consumers.
The carrier also signalled that any deal would likely run counter to US antitrust principles and the current administration’s approach to competition in the airline industry.
Reports had suggested that Scott Kirby, chief executive of United, had pitched the idea of a merger to Donald Trump.
However, industry experts say a deal of that scale would face significant regulatory hurdles.
Lawmakers have already voiced concerns.
In a bipartisan letter, senators including Elizabeth Warren and Mike Lee warned that a merger could lead to higher airfares and reduced service on overlapping routes.
A combined entity would create one of the largest airlines globally by passenger volume, raising fears of market concentration in key hubs such as Chicago’s O’Hare International Airport, where both airlines have a strong presence.
Oil price surge adds pressure on airline stocks
Beyond merger speculation, airline stocks were dragged lower by a fresh spike in oil prices, which jumped around 6% amid uncertainty over US-Iran peace talks and the stability of energy supplies.
The volatility has been closely tied to disruptions around the Strait of Hormuz, a critical artery for global crude shipments.
Higher fuel costs directly impact airline profitability, with jet fuel representing one of the largest operating expenses.
Shares of major carriers, including Delta Air Lines and Southwest Airlines, also fell more than 2% in premarket trading, reflecting broader investor concerns about cost pressures.
Cruise operators such as Royal Caribbean, Norwegian Cruise Line, and Carnival were similarly under pressure.
Flight disruptions compound operational challenges
Operational disruptions added to the sector’s woes over the weekend, highlighting the strain on airline networks.
More than 1,200 flights operated by Southwest were delayed on Sunday, accounting for nearly a third of its schedule, according to flight-tracking platform FlightAware.
American Airlines reported 799 delayed flights, or roughly 22% of its operations, while Delta and United saw 16% and 13% of their schedules disrupted, respectively.
The delays come at a time when airlines are already grappling with staffing challenges, weather-related disruptions, and rising demand during peak travel periods, amplifying the impact on customer experience and operational efficiency.
Consolidation debate intensifies
The prospect of consolidation in the US airline industry has gained traction as carriers face mounting cost pressures, particularly from fuel.
Executives have argued that scale is increasingly important to compete globally, especially against state-backed international airlines.
Kirby has previously suggested that US airlines may need to grow larger to remain competitive on international routes.
However, analysts note that any merger between American and United would likely require extensive divestitures to address antitrust concerns, potentially undermining the strategic rationale for such a deal.
American, which has lagged some of its peers in profitability in recent years, is also dealing with internal pressures, including tensions with labour unions.
Adding a layer of complexity is the personal history between the two companies’ leadership.
Kirby previously served as president of American before leaving in 2016 and later joining United, where he became chief executive in 2020.
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