American Airlines Rejects United Merger Bid as Oil Prices Hit Airline Stocks

TLDR

• American Airlines rejected United Airlines’ merger proposal, calling it bad for competition and consumers
• Oil prices jumped 6% due to uncertainty over US-Iran peace talks, hitting airline stocks
• American Airlines stock fell 3% premarket Monday after Friday’s gains were wiped out
• Flight disruptions are growing — over 1,200 Southwest flights were delayed Sunday alone
• American Airlines reports earnings Thursday; United and Southwest also report this week

American Airlines shares dropped 3% in premarket trading Monday after the carrier flatly rejected merger talks with United Airlines late Friday.

American Airlines Group Inc., AAL

American added that a deal would be “negative for competition and for consumers,” and inconsistent with antitrust principles.

United CEO Scott Kirby had floated the merger idea with the Trump administration at the White House back in February. He had been considering it since at least last fall.

A combined United-American would have become the world’s largest airline. Together, the two would hold roughly 40% of domestic capacity, according to airline data firm OAG.

Cornell law professor George Hay was blunt about the legal hurdles: “This would be the biggest of all time. I can’t even see the slightest chance that a court would allow it.”

Oil Prices Add More Pressure

Beyond the merger news, oil prices jumped 6% Monday due to fresh uncertainty around US-Iran peace talks. Rising fuel costs are a direct threat to airline profits.

Shares of United, Delta, and Southwest all fell more than 2% in premarket trading. Royal Caribbean, Norwegian Cruise Line, and Carnival were also down around 2%.

The declines came after those same stocks had rallied on Friday when oil prices briefly fell following the reopening of the Strait of Hormuz.

Flight Delays Pile Up

Flight disruptions added to the pressure. More than 1,200 Southwest flights were delayed Sunday — about 29% of its schedule, according to FlightAware.

American delayed 799 flights, or 22% of its schedule. Delta and United saw 16% and 13% of flights delayed respectively.

American stock is down 17% for the year, though it surged 19% in April as hopes for Middle East peace grew.

American Airlines stock jumped 8% last Tuesday after reports of the United merger pitch, then rose another 4% on Friday.

American Airlines reports quarterly earnings on Thursday. United Airlines and Southwest also report results this week.

Delta has already shown it can largely absorb rising fuel costs. It remains to be seen how the other carriers will manage.

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