February 23, 2010
United Airlines is open to merging with US or foreign carriers as the industry is “poised for consolidation,” the airline’s chief financial officer said on Tuesday.
“UAL has been supportive of consolidation for a long time,” CFO Kathryn Mikells said at the Reuters Travel and Leisure Summit in New York. “It is something we will continue to look at.”
Mikells declined to comment on whether United’s parent company, UA, was in talks with other carriers, but added that the airline is seeking more alliances, especially in regions such as South America and Brazil.
In 2008, sources said that United was in talks with Continental Airlines and US Airways about a possible merger with either company. Mikells declined to comment on whether those talks had resumed.
She said barriers preventing foreign airlines from entering the US market were blocking global consolidation at a time when airlines needed scale. Current US law restricts foreign ownership of US airlines to 25 percent of voting stock.
“Clearly, outside of the US, consolidation is underway,” Mikells said. “Not being able to participate in that in a more material way just really positions the US companies detrimentally relative to international carriers.
“We are hopeful as we move into this recovery period… that folks will focus again on the fact that we need to have the same ability to make changes in our industry as other industries clearly have,” she said, referring to sectors such as autos and technology.
INDUSTRY LOSSES
The airline industry has lost USD$50 billion in the past 10 years, including USD$11 billion in 2009 alone, according to the International Air Transport Association. The trade group expects the industry to take at least three years to recover from the slump in demand caused by the recession.
Mikells said United was seeking more alliances and was planning to eke out more cost savings from current partnerships, which typically focus on sharing revenue.
“We are now focusing more on the cost side by co-locating at airports, sharing IT systems, doing joint investments in information technology,” she said.
When asked if the 2008 merger between Delta Air Lines and Northwest Airlines had made the combined carrier a stronger competitor, Mikells said the market had spoken: Delta’s current market capitalisation is nearly $10 billion, about twice that of United and Continental Airlines combined.
(Reuters)