Could We See a Pandemic-Induced Airline Merger?

The coronavirus pandemic, which has curtailed air travel by some 60 percent in 2020 compared to 2019 and has caused the airline industry to lose $35 billion, could be the trigger for a potential merger between U.S. carriers, some analysts have speculated.

“We’re expecting M&A (mergers and acquisitions) to occur,” long-time airline industry analyst Helane Becker of Cowen told Yahoo Finance Live. “You could see United Airlines buying JetBlue. United is going back to (New York’s John F. Kennedy International Airport) after an absence of a few years and it (JetBlue) has a big presence there.”

Yahoo Finance Live noted that Becker has Market perform ratings on both United and JetBlue.

She also has Allegiant Air listed as Market perform and Spirit Airlines at Outperform, and said there could be a merger potential there.

“You can see Allegiant, Frontier and Spirit merge,” Becker said. “Those three airlines have a 3 percent market share, maybe a little more now since they are so domestic. They would be a really terrific competitor to the Big Four because they are so low cost and they’re so domestic and leisure-focused.”

In a great analysis piece, Reuters News Service agreed that consolidating makes financial sense. “Most other countries have a single flag carrier implicitly or explicitly backed by the state. America doesn’t, but pandemic bailouts have made the Big Four quasi-government-owned, giving the public a stake in their future,” Reuters said. “And merging hasn’t worked out too badly for consumers so far. Ticket prices adjusted for inflation have halved since 1995, when America’s skies were awash with carriers, according to the Bureau of Transportation Statistics.”

But it’s likely not happening anytime soon.

Becker said the toll the pandemic has had on air travel and airline cash flow has caused stock prices to plummet, which are unattractive in trying to fund a deal.