Delta Says No Merger With U.S Airlines

Delta is sitting out the merger talk; consolidation is heating up in the U.S. aviation industry, as United flirts with American Airlines.

Instead, CEO Ed Bastian says that Delta will prioritize its own global expansion and seek partnerships over domestic mergers, reflecting a belief that the business is successful on its own.

With that belief, Delta does not need a transformative deal, especially as political windows may now be more open than ever for businesses to come together to secure their futures over the coming decades.

No Merger Frenzy For Delta

In a recent interview in New York, Bastian was rather explicit about his orders, making it clear there was no intent to proactively pursue mergers or domestic transactions, even as some smaller U.S. carriers struggle.

Opportunities would naturally be evaluated if they arose; however, Bastian said there is still a strong rationale to stay on its own two feet now and not pursue consolidation efforts, even though regulators appear more than ever receptive to such deals.

Bastian’s stance differs significantly from that of its competitor, United Airlines, and is largely at odds with other U.S. carriers, which have instead pursued prior deals or are actively pursuing consolidation to secure their futures.

Alaska’s acquisition of Hawaiian has now cleared hurdles that were present and is moving towards full completion, the pair looking to reshape connectivity from the West Coast and leverage the 787 Dreamliner to launch many new international routes.

Then there’s United’s CEO, Scott Kirby, who floated a combination with American Airlines at the White House to create the world’s largest airline by nearly every metric if it were to proceed. That the proposed deal has been rejected is an indication of the stance held by an airline of this stature.

Meanwhile, even after a United merger was rejected, American Airlines was reported to be floating a combination with Alaska Airlines, including revenue-sharing agreements, after a full merger was pushed back, adding even more fuel to the fire.

Here’s Why Delta Doesn’t Need A Merger

Delta’s confidence that it can stand on its own rests largely on its current position and, fundamentally, on its performance. The airline has grown its premium cabins, loyalty, and non-ticket revenue over the years.

The airline has already noted that metrics from premium ticket sales have overtaken those from Economy Class, and now premium cabin revenue comfortably exceeds income from Economy Class and other revenue streams, which is key to its annual figures.

Bastian has publicly said that United is more than ever looking to copy the Delta approach, and a model the business believes it holds that is successful, something rivals are chasing and indicates they are on the right path.

Consolidation, therefore, for Bastian, while not confirmed outright, is viewed as a weaker tool for an airline needing stability. Bastian further suggested that the mergers are more likely among those airlines that are stressed from a financial standpoint, which, unfortunately, many are, and follows Spirit Airlines’ shutdown at the beginning of May.

With mergers among the larger businesses touted, Bastian sees nothing urgent. He believes that, if pursued, they would open a can of worms involving the integration and approval process. If anything, it is distracting from what the core business is trying to deliver, recording revenue at a margin that sets the bar higher and higher over time.

The Approach Delta Is Taking

With no consolidations visible in the picture, the airline is instead planning to deepen its footprint abroad, not just by returning key services but also by expanding, for example, in Riyadh, while targeting growth in Asia and South America.

The airline has developed international JVs and alliances as well, and this stitching together has scaled its global network without requiring it to own an entire asset base.

That approach, Delta says, plays to its strengths. Its strong brand, a premium, heavy product, and a track record of delivering high yields from corporate and leisure demand have helped ensure strong results over time.

International expansion is a major focus, but so is developing domestic trunk routes where capacity is available and can be secured, all on its own without needing to absorb another carrier entirely.

The ambitious United Airlines aims to become one of the world’s most renowned carriers, and with a network and employee base to show for it. Therefore, its expansion into and out of the United States will be aggressive, forcing Delta to compete.

Delta is arguing that it will build a global network and strong partnerships that will continue to grow and prove effective in competing with a larger rival over time, especially if its competitors are distracted by integration pursuits or the hurdles they entail.