The airline industry doesn't seem to like actual mergers all that much, but it obviously loves merger talk.
The latest theory to pop up involves
. To some, David Neeleman's move last week to step down as CEO portends a merger, the idea being that the company's founder didn't want to see his baby absorbed by another carrier.
It has a certain, limited logic. JetBlue has two valuable assets -- a strong position at New York's Kennedy Airport and new Airbus A320s. Delta is growing at Kennedy. For that matter, so is
American. And everybody needs newer airplanes.
Trying to figure out whether somebody might acquire JetBlue is fun -- as they say, it beats working. At the same time, there's no indication that JetBlue has any desire to be bought, or that anyone has any real desire to buy it.
When the merger question was raised during last month's earnings conference call, Neeleman said there have been "no conversations with a legacy carrier about acquiring the airline." He added that "I would reiterate that would not be something that we would want." Now Neeleman is out as CEO. Hmm.
Actually, several merger and buyout ideas have surfaced in recent weeks, some of which were floated by respected analysts.
Last month, Roger King of CreditSights suggested that
would be a good takeout candidate. "A Southwest Airlines LBO is a no-brainer in the current financial market," he wrote in a research report.
The thought moved Southwest's stock and came up on the earnings call, but there was no indication that the Dallas-based low-fare carrier has any interest in a deal.
Two weeks later, Raymond James analyst James Parker wrote that
could be acquired by another low-cost carrier. He noted that both its Denver hub and its Airbus fleet are attractive, and he mentioned several possible buyers.
Still, he said an acquisition "is not highly probable," even as he upgraded the stock. Wall Street heard what it wanted to hear, and the stock price rose.
The fact is that consolidation has two big supporters in the airline industry. One is Doug Parker, CEO of
. He failed to push through a hostile merger with Delta, however, and he's now up to his eyeballs in trying to complete the 2005 combination of the old US Airways and America West.
Operationally, it's not going well. A reservations systems merger faltered, causing the carrier to indefinitely delay a move to a single operating certificate that had been planned for June. Then, early this month came an arbitrator's ruling on merging pilot seniority lists. The ruling, which favors younger America West pilots over older US Airways pilots, has left many in the latter group deeply dispirited.
Parker didn't make the decision, but he must deal with the consequences, which could be unpleasant if pilots act to stretch out flight times or turn down extra flying. The situation is just another indication of how messy mergers can be, even though in this case the union probably saved US Airways from extinction.
The industry's other merger advocate is Glenn Tilton, CEO of
. Tilton approached Delta about a merger and talked with
, and it's likely he put out other feelers, as well. Nothing happened.
Aviation consultant Mike Boyd says that much of the industry's merger talk originates with "cyberbloggers without a life, starting rumors,
or with analysts who, without a thread of evidence, say 'Wouldn't it be neat if...'"
What if we just concede that mergers don't work and instead talk about a JetBlue codeshare at Kennedy, which would allow an international airline to utilize the carrier's domestic network?
Unfortunately, consultant Robert Mann says that wouldn't work, either, because JetBlue doesn't have first class. While American is part of the Oneworld alliance and Delta is part of SkyTeam, "Star Alliance doesn't have a strong proxy at Kennedy," Mann says. "So if there was any call for this, it would be a Star Alliance call. The problem is that JetBlue doesn't have the assets an alliance is looking for."
When you're talking airline deals, however, the problem is a minor one.