The Rumor Mill: Southwest Airlines in Acquisition Mode?

Despite poorer-than-expected performance and a depressed stock price, Southwest Airlines still has an outstanding balance sheet and the financial capacity to make an acquisition. The industry rumor mill is rife with speculation that they will acquire another airline in 2024.

The Southwest Airlines Pilots Association sent a message to members that it will be engaging multiple law firms to be prepared if Southwest moves to acquire another airline. One law firm would likely specialize in labor issues and be looking to integrate seniority lists. A second law firm would likely focus on the business aspects of a potential transaction. A relevant portion of a message from the union leadership to members follows:

“Last month, SWAPA decided to retain several law firms if Southwest attempts to acquire another carrier. One of those firms would be an experienced labor firm tasked with protecting SWAPA Pilots in a seniority list integration. The second — and possibly third — firm would handle the business and equity side of the transaction to ensure our Pilots were invested in the capital of the new entity. In 2010, then-SWAPA President Carl Kuwitsky and then-CEO Gary Kelly failed to follow Delta/Northwest’s lead in allowing the Pilots to be equity partners in the transaction when Southwest acquired AirTran. SWAPA will not make that mistake again.”

Any potential merger discussions would be covered under confidentiality agreements, and the message about hiring counsel to Southwest pilots indicates that neither the union nor anyone else at their organization has specific knowledge of merger or acquisition plans.

The Likelihood of a Merger

Southwest has been linked in rumors to JetBlue and Sun Country as potential acquisitions. The likelihood of the former, after the JetBlue Spirit merger was negated and the Northeast Alliance code-sharing partnership with American was also nixed, is questionable. Would a Southwest-JetBlue merger be considered anti-competitive under the Biden administration policies, even with low route overlaps? Is JetBlue’s delay in announcing its post-Spirit strategy potentially due to merger discussions or Carl Icahn’s influence?