Make of these comments what you will, but I really think things could heat up in the very near future…

On CNBC today, United States Transportation Secretary Sean Duffy was asked to comment on how there’s growing chatter about one of the “big four” US carriers potentially acquiring another airline. Specifically, this was in the context of the bulk of the industry profits being with two airlines, and the oil price situation making things even worse for airlines.

Here’s how Duffy responded:

“That’s going to come through us, but also President Trump loves to see big deals happen, he would have to review that kind of a deal, it has to go through DOJ, it’ll come to DOT. I think, who knows who’s going to match up, right? There’s always chatter, but is there room for some mergers in the aviation industry? Yeah, I think there is.”

He was then interrupted to confirm that this was in reference to consolidation in the United States, and then he continued as follows:

Yeah, yeah, I think so. Again, there’s a lot of chatter, and a lot of people talking amongst themselves about what that should look like. I’m going to see, is there a deal that’s brought to the table, how does it look, what impact does it have on competition, what is it going to do for the consumer, what is it going to do for us to be competitive globally, to make sure we have the biggest and best airlines competing around the world.”

He was then asked a follow-up question about market share:

“But what if that means one of the airlines no longer has 20%, the big four all around 20% market share, what if they go up to 30%, 35%, would you be okay with that?”

He then responded as follows:

“We’d have to look at it at a case-by-case basis, and if there was a merger between some of the larger airlines, they’re going to have to peel off some of their assets, we don’t want to have this massive infrastructure with one airline in America.”

Admittedly Duffy isn’t the primary person responsible for deciding whether or not an airline merger gets approved. So everyone can decide for themselves to what extent he’s just sharing his own opinion, vs. something that reflects discussions he has had with Trump.

My impression based on the above is certainly that Duffy is very open to consolidation, even it it includes one of the “big four” US carriers, with the caveat that some concessions might need to be made.

It seems highly likely that if there were any consolidation activity in the near future, it would involve JetBlue, as the airline is reportedly looking at being acquired. JetBlue is an airline with a lovely passenger experience and it could add huge value to another airline group, but it’s just set up to fail based on its current reality (JFK just isn’t a great airport to be based at if you’re primarily operating domestic flights).

JetBlue, meanwhile, would add such value as part of a larger airline group, like belonging to American or United. United CEO Scott Kirby hasn’t been secretive about his interest in acquiring JetBlue, though he does sometimes send mixed signals (one day he’ll say that “the ball is going to be in JetBlue’s court” when it comes to a merger, and the next day he’ll say he has no interest in a merger).

I do have to imagine that this is going to get interesting very soon. If United is interested in acquiring JetBlue, or if it at least wants to make sure that no competitor gets JetBlue’s most important assets, then I have to imagine this is the time to take action:

• Kirby has been very pro-Trump, and has certainly been saying the right things to get favor with him
• From a regulatory standpoint, it seems like there’s no time like the present, since it seems like there would be the least regulatory scrutiny before the midterms
• It seems that the bump in oil prices gives the perfect opportunity for an airline to claim that a merger is now a matter of survival more than anything else

I don’t know how this is going to play out. I think this is too much for Alaska to take on right now, given that it’s still integrating with Hawaiian. I think a Southwest merger makes almost no sense. I know United is sort of desperate for JetBlue, even though I question the obsession with JFK. But really I think American needs JetBlue more than any other airline, and it would be the most pro-consumer deal. The issue is American’s poor financial situation.

So we’ll see if anything happens. I’m starting to think that we’re at the point where something should happen soon, and if it doesn’t, then I think it’s indicative of no deal happening with JetBlue.

Bottom line

Transportation Secretary Sean Duffy was asked about the possibility of further consolidation in the US airline industry. He said that he thinks there’s merit to further consolidation (including one of the “big four” carriers taking over a smaller airline), and also mentioned how Trump likes big deals.

So while he’s not the final judge on any industry consolidation, I’d say that’s a pretty pro-consolidation approach for him to take.

What do you make about Duffy’s comments on consolidation?