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Merger talks between American, United tinged by CEOs' personal history

Minus all the Medieval brutality and dragons, April’s feud between United and American airlines has all the makings of a season of Game of Thrones, thanks to the history between United CEO Scott Kirby and his former employer, American.

In early April, rumors swirled about a potential merger of United and a beleaguered American after Bloomberg reported that Kirby floated the idea in a February meeting with President Donald Trump. American, and its CEO Robert Isom, quickly shut down the rumors, issuing a statement saying it, “is not engaged with or interested in any discussions regarding a merger with United Airlines.”

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Kirby eventually conceded Monday, confirming he had approached American with the merger idea, but the rival airline wasn’t interested.

“I was confident that this combination, which would have been about adding and not subtracting, creating a truly great airline that customers love, could get regulatory approval,” Kirby wrote in a lengthy release. “I was hoping to pitch that story to American, but they declined to engage and instead responded by publicly closing the door. And without a willing partner, something this big simply can't get done.”

While many analysts have evaluated this back and forth through the lens of headwinds facing the airline industry — soaring jet fuel prices due to the war in Iran, Spirit Airlines filing for bankruptcy a second time, union spats, etc. — this particular big-business conundrum has a personal edge.

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Kirby, Isom and longtime airline CEO Doug Parker were once a “Dream Team” triumvirate atop US Airways, then at Fort Worth-based American, until Kirby was forced out in 2016 and Isom usurped him as Parker’s heir apparent.

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Kirby’s career as an airline executive started in 1995 with America West Airlines, the same year Parker became CFO and began training to be the airline’s next CEO. Isom also spent time at America West during this period. Parker assumed the top job in 2001 and negotiated a reverse takeover with US Airways in 2005, which saw the much smaller America West gain control of its larger competitor. Parker became CEO, Kirby became president and, in 2007, Isom joined as executive vice president and COO of the newly combined airline.

While Isom developed his own reputation as an astute manager of operations, Parker and Kirby formed what Business Insider called “one of the best management teams in modern airline history.” Kirby himself has been described by analysts and industry folk as “aggressive” and “gifted and no-nonsense,” per CNBC.

Under the trio’s leadership, US Airways went from declaring bankruptcy in 2004 to topping the 2011 Airline Quality Rating, with Isom leading improvements in baggage handling and on-time performance as Kirby and Parker grew revenue from about $5 billion in 2005 to $14 billion in 2012.

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In that time, Parker pursued several mergers, targeting Delta and United for takeover by US Airways. Rebuffed several times, he finally found a viable candidate in the well-known but bankrupt American Airlines, and in 2013, it and US Airways merged. Once again, Parker became CEO, Kirby president and Isom COO.

American continued to operate the US Airways brand until 2015, but less than a year after US Airways flew its last flight, Kirby was out at American. In August 2016, American announced Kirby, long assumed to be next in line for Parker’s job once he retired, would be leaving the airline, and Isom would take over his position. On the same day, Kirby was hired as president of Chicago-based United under CEO Oscar Munoz.

The shakeup was a shock, as it broke up a leadership group that transformed the airline industry and cemented Isom as Parker’s successor at American. While all involved were mostly mum at the time, View From the Wing reported that Parker spoke candidly about the situation in an employee town hall in 2018, where he called the conversation with Kirby “the worst day of [his] life.”

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“The problem we had was we had a lot of really good executives. And as we sat at the board level and talked about succession planning, we had a real concern about our ability to keep that team together. Someone was going to leave. So rather than watching and guessing who that was and trying to react, we were proactive,” Parker reportedly said.

“We’d like to keep me, Scott and Robert and keep doing what we’re doing for the last 20 years together, but it doesn’t look like it’s going to be the case. So … what’s the best scenario of two of those three, and we decided, the board decided it was me with Robert,” he continued.

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Since joining United and eventually being named CEO in 2020, Kirby has been known to needle American Airlines in public statements. Kirby’s tenure at United has been undeniably successful, helping it challenge Delta as the premier carrier in the U.S., and he’s used that success to covertly disparage American in earnings calls and other forums.

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Isom, meanwhile, has been reticent to speak on Kirby, who didn’t move out of Dallas when he joined Chicago-based United. However, in a J.P. Morgan investor call last year, Isom answered a question about Kirby’s claim that United and Delta were the only two premium carriers in the U.S.

“I worked for Scott and with Scott for a long time. I’ve seen him be right on a lot of stuff. He’s a brilliant man. I’ve seen him wrong on a lot of stuff. In this case, he’s dead wrong,” Isom said. “Scott says this kind of stuff I’m sure because he would like nothing better than to not have American Airlines as a competitor … [but] American’s not going anywhere.”