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Former United CEO Signals Investor Interest in Acquiring U.S. Airlines Amid Low Valuations
Oscar Munoz reveals growing investor conversations about acquisitions in the U.S. airline industry, anticipating activity post-earnings season.
The gist
Ex-United CEO Oscar Munoz says investors are circling cheap U.S. airlines, with possible deals expected soon after earnings reports.
Former United Airlines CEO Oscar Munoz has disclosed increased investor interest in the purchase of U.S. airlines, hinting that a substantial deal could materialize soon after the industry's upcoming earnings announcements. During an episode of Airlines Confidential, Munoz remarked on active discussions with outside investors who had largely ignored the sector previously but are now paying attention amid depressed airline valuations.
Recent commentary by industry observers highlights the striking discrepancy in market valuations within the U.S. airline sector. For instance, it has been noted that the restaurant chain Texas Roadhouse holds a higher market value than American Airlines. Additionally, Delta Air Lines commands a market capitalization roughly five times that of American, despite not being five times larger in size. This contrast largely reflects Delta's consistent profitability versus American's struggles to generate earnings.
The airline business remains challenging for investors due to factors such as capital intensity, strong union presence, heavy regulation, and limited growth prospects. Airlines typically exhibit low price-to-earnings multiples because stable, rising returns are scarce in this arena. Munoz has pointed out that operational excellence must increasingly be regarded as a financial strategy to drive value creation within airlines.
Munoz also disclosed his behind-the-scenes counsel to Southwest Airlines management in crafting their response to activist investor Elliott Management. His involvement was indirect but strategic, assisting Southwest in formulating a management position to address Elliott's push for changes. An earlier essay authored by Munoz defending Southwest’s CEO Bob Jordan and critiquing Elliott’s approach notably did not disclose his advisory role, although Southwest used excerpts from that essay in their official proxy materials.
Investor activity in the U.S. airline space has become more prominent, Munoz emphasized. He described the participation of more sophisticated outside investors who are reassessing the sector's potential. He anticipates additional 'noise' and possible transactions to emerge soon, especially after the upcoming earnings reports provide fresh data points for decision-making.
Despite this renewed investor interest, Munoz cautioned that airline turnarounds generally require extended time horizons due to the need for capital investment and regulatory considerations. Unlike Southwest Airlines’ past model of leveraging an investment-grade balance sheet coupled with operational tweaks, few carriers offer similarly quick paths to profitability or stock appreciation.
The historical reluctance of investors to commit long term to airlines is exemplified by Berkshire Hathaway’s cautious approach. Warren Buffett famously highlighted the difficulty of sustaining profits in airline companies and has remarked on the perils of investing in this sector with a famous quip about the Wright brothers. This skepticism has contributed to airlines often being considered more as short-term trading opportunities rather than enduring investments.
The market landscape includes ongoing discussions among major airlines considering mergers and acquisitions. JetBlue has engaged advisors to explore potential deals, while United Airlines’ CEO Scott Kirby has revealed conversations about acquiring assets from other airlines including American. American Airlines’ CEO has also discussed potential transactions with Alaska Airlines, signaling a fluid environment where consolidation possibilities are actively evaluated.
Frequently asked questions
- What reasons are cited for low valuations of U.S. airlines?
- Airlines are capital intensive, heavily unionized, highly regulated, and have limited growth potential, leading to low market valuations.
- How has Oscar Munoz been involved with Southwest Airlines?
- Munoz assisted Southwest management in crafting their response to activist investor Elliott Management, providing strategic advice.
- What kinds of investor activity are expected in the U.S. airline industry soon?
- Munoz predicts increased investor conversations and possible acquisition deals after the next round of earnings announcements.
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United Airlines Anticipates Full Fuel Cost Recovery by Q4 Amid Rising Expenses
US carrier’s operating profits slip 17% to $1.1 billion in second quarter. United Airlines expects to be recovering all of its additional fuel costs through higher fares by the fourth quarter after today disclosing an operating profit of almost $1.1 billion in the second quarter. The Star Alliance carrier's second-quarter operating profit was down 17% on the $1.3 billion it made for the same period in 2025, while net profit slipped to $805 million from $973 million a year before. That was achieved in the face of a $2.3 billion – or 84% – increase in its fuel costs for the April-June period. The carrier estimates it recovered around half of this additional cost during the second quarter. United’s revenues climbed 16% in the second quarter to almost $17.7 billion, supported by a 12% rise in yields. United Airlines chief executive Scott Kirby says: “United is built to thrive in every environment, and when oil prices spiked in March, we quickly and decisively acted to adjust our schedules, while simultaneously doubling down on our customer investments." The US carrier estimates, based on current oil prices, that its fuel costs for the full year will be nearly $6 billion higher than in 2025. "In the third quarter the company expects to recover approximately 80% to 90% of the increase, and 100% by the fourth quarter," it says.
Airlines Confirm Structural Shift with Sustained Fare Increases Amid Rising Fuel Costs
Earnings season has officially begun with, as always, Delta kicking off festivities late last week and then United just yesterday releasing its numbers . The airlines unsurprisingly did very well, but the results and more importantly, forward-looking guidance, show that we may have finally seen a structural shift. Airfares are up, and I don’t imagine they’ll be going back down anytime soon. On the surface, it looks like Delta is outperforming with an operating margin of 9.4 percent versus United’s 6.2 percent, but remember, Delta owns a refinery and that helped boost the company’s fortunes this quarter. Since today’s topic is about the core business, let’s try and strip out fuel’s impact. Excluding the refinery, Delta’s operating revenues were up 13.9 percent, below United’s 16.0 percent Fuel expense at Delta rose 67.2 percent year-over-year while United was up 84.1 percent Fuel went from being worth 55.8 percent of Delta’s largest expense — total salaries and wages expense — to 86.3 percent, but at United fuel soared to become the airline’s number one cost at 109 percent of salaries and wages Delta’s unit costs were up 21.4 percent, but excluding fuel, they were up only 6.8 percent while United’s numbers were up 15.2 and 6.1 percent respectively You get it. Fuel is a big deal, and it was very messy in Q2 when the bulk of the Iran War was being waged. And yes, I’m well aware that it’s still being waged and probably won’t end anytime soon now that Iran has learned it can toy with the Strait of Hormuz whenever it feels like it. Just look at the downward slope reversing course recently. via IATA And when fuel goes up, fares have to go up. In the past, this often meant cutting significant capacity thanks to basic economics, but that’s not happening now. And even when fuel came down off its highs, fares didn’t budge downward at all. Demand has been very strong, and it took an event like this to get airlines to actually be able to take real pricing increases for the first time in a long time. To see what I mean, you can look at the Government Accountability Office’s new report on the impact of mergers . I sat with Courtney Miller as my guest host on The Air Show this week to talk about that report in detail. I won’t get into those details here, because it frankly isn’t helpful to this discussion since the study period stopped in 2024. This just provides the historical context that fares have been going down for quite some time. In other words, while this consolidated industry structure has been in the works for a couple decades, the airlines really didn’t significantly flex their pricing muscles until recently. The Air Show A podcast about the business of the sky Listen on Spotify | Listen on Apple Podcasts There’s no question that consolidation made this possible, and sometimes in ways you might not imagine. For example, airline pricing teams are better at their jobs simply because there are fewer of them out there. The ones that remain tend to be much better at the job at hand. The reason this is so important for gaining pricing power is that one airline has historically been able to tank a fare initiative pretty easily, even something as simple as a small, across-the-board fare increase. Today, we aren’t seeing that. Let’s get back to Delta’s results — I can’t do this with United yet since the 10-Q wasn’t out at the time of publication. Strip out things like loyalty revenues (which always seems to go up these days) and look at just Delta’s Q2 ticket revenue, and we see it increased 12.5 percent year-over-year. The reality is that fares went up much more than that, because a decent chunk of Q2 bookings happened before the recent run-up. But even 12.5 percent is a remarkable increase considering that capacity was flat. This doesn’t look like a temporary blip, even though we know everything in this industry is somewhat temporary. Just look at Delta which reaffirmed its earnings guidance for the full year and United which improved it . They won’t be the only ones. It’s easy to say this is all due to that growing pot of credit card money or refinery earnings or something else, and yes, those all help. But the reality is that none of this happens without the industry’s main players all realizing that there is room for higher fares. Even if that weren’t the case, it has become easier for airlines to insulate themselves from low-cost airline fare actions, something that has always been a problem. Pricing is far more complex than it was in the past, so there are more levers to pull. If Frontier decided it wanted a massive sale since its results are not great, the other airlines could match with Basic Economy fares only and not see their entire fare structure collapse. The ability to better segment means that fare actions can be compartmentalized. The airlines love segmentation so much that it continues to spread. Delta is now introducing Basic Business — or as I like to call it, Delta None — which will undoubtedly keep the same pricing business class has today, simply creating an upsell for those who want a seat assignment in advance along with other goodies. It’s a straight-up fare increase that others likely can’t torpedo. (United has already gone down this path anyway.) All this being said, fare increases don’t work in a vacuum. Capacity levels are very important, and the industry has seen capacity decline dramatically very recently. Spirit finally went away in Q2 after being unsustainable as a business for a couple of years. This takes away one more desperate management team and further consolidates the industry into something more rational. This doesn’t mean that fares will only go up from now on. There will be a recession. There will be downturns. Maybe there will even be a well-funded startup, though that doesn’t seem very likely today. We don’t know when, but when this happens, fares will fall. But instead of plunging, airlines will better manage their capacity and keep pricing at a higher level. This is exactly the kind of thing former American CEO Doug Parker meant when he said the industry wouldn’t lose money again. It was a tone-deaf statement that didn’t land with employees, but it also didn’t prove to be strictly true. Of course, he wasn’t thinking about a global pandemic when he said it; he was talking about normal economic cycles. And he was right. The thing is, the big airlines hadn’t really been willing to test it out until this year once it was pretty clear they had largely vanquished the low-cost carrier threat. Admittedly, we haven’t seen this tested in any significant way since the pandemic ended. Only time will tell if this is right or not, but the fact that airlines are pushing fares higher and not seeing much blowback means they will be emboldened to keep trying to push the envelope. Now the only real question is whether the government will eventually decide this is an antitrust issue that it needs to revisit.
United Airlines surpasses Q2 earnings forecasts despite $6 billion fuel cost surge
United Airlines' second quarter financial results beat Wall Street projections despite the US carrier projecting a $6 billion fuel hit this year. On July 15, 2026, United Airlines CEO Scott Kirby lauded the airline's ability to "thrive in every environment" even when oil prices spiked in March 2026. "We quickly and decisively acted to adjust our schedules, while simultaneously doubling down on our customer investments," Kirby added. United confirmed that full-year adjusted diluted earnings per share guidance is raised to $9 to $11. The airline posted adjusted earnings of $1.99 per share, above the $1.85 predictions. Based on oil prices as of July 14, 2026, United expects nearly $6 billion in added fuel expense for full-year 2026 compared to the expectation at the start of the year. United Airlines In the second quarter alone fuel expenses were up $2.3 billion, although the company said it was able to recover around half of this increase. Its successes included premium revenue being up 16% compared to the second quarter of 2025, while revenue from economy class was up 11%. United's revenue for the second quarter rose 16% to $17.67 billion. During the same period last year, the figure was $15.2 billion. The company's operating income was down 17% from $1.3 billion during the second quarter in 2025 to $1 billion over the same period in 2026. Net income also dropped 17% to $805 million from $973 million last year. Highlights included United announcing that 450 aircraft now have Starlink stalled with nearly 1,000 expected by year end. United said it remains on track to bring Starlink to the whole fleet by the end of 2027. You can view the full results on the United Airlines website . RELATED Rolls-Royce, Boeing and Lufthansa line up new 787-9 ecoDemonstrator venture
United Airlines Cracks Down on Reserve Flight Attendants Absent from Base During Duty Period
United Airlines is targeting new-hire flight attendants who have allegedly gone AWOL while on reserve duty, doling out disciplinary action, including termination, to crew members who have been accused of what the Chicago-based carrier describes as ‘being out of position.’ Junior flight attendants at United Airlines generally spend their first two to three years on reserve duty, which means they don’t have fixed flights in their roster but are on reserve for last-minute callouts for flights that don’t have enough assigned crew members due to sickness or unexpected changes. Reserve flight attendants normally have several to get to their assigned base if they are called from home reserve, but many new-hire crew members don’t live in their base city because United’s hub airports are located in some of the most expensive metro areas in the United States, with a very high cost of living. It appears that some flight attendants are taking a risk by not being physically present at their assigned base at the exact time their reserve period is due to begin. Instead, they are on a commuting flight to their assigned base at this time, knowing that even if they were called for a duty, they would still arrive within the callout window. In other cases, though, some flight attendants are believed to be taking a calculated risk and not even bothering to travel to the same city as their assigned base. In these cases, the flight attendants can see where their name appears on the reserve callout list and figure that the chance of them getting called out isn’t worth their effort to commute to their base. Since February, however, United has been clamping down on this behavior, with the airline taking the position that reserve flight attendants must be physically present at their assigned base or within a three-hour travel time from the moment the reserve period starts. While the airline isn’t tracking flight attendants using company-issued smartphones, the airline is able to scour flight bookings to determine whether a crew member is ‘out of position’ at the time their reserve duty starts. For example, if a crew member has booked a standby flight from the city in which they live to their base, and it’s not set to depart until after their reserve duty starts, then this is a good indication that the flight is ‘out of position.’ Likewise, if a flight attendant has traveled on a flight from their base to the city in which they live but hasn’t booked a flight to return to base on the day their next reserve duty starts, then this also indicates that the crew member was hoping they just wouldn’t be called out. It’s United’s stated position that reserve flight attendants must be in their base city by 11 pm the night before their reserve duty starts. The reserve duty then starts at one minute past midnight, and the first time they are expected to start is at 4 am. The Association of Flight Attendants (AFA-CWA) is challenging United’s clampdown, saying that their contract explicitly states that reserve crew members are only required to be available to accept an assignment and then timely report for that assignment as given at the stated times. In other words, as long as the flight attendant accepts the assignment and turns up at base at the required time, it shouldn’t matter where they were before that point. The union has filed a grievance in an attempt to get United to ease off, but while the grievance works its way through the legal process, AFA has warned its members that the airline could continue to discipline flight attendants that is has deemed as being ‘out of position.’ In 2022, American Airlines terminated more than 50 flight attendants in just six months over similar allegations. The airline started terminating crew members after it became so frustrated with reserve flight attendants failing to turn up for flights they had been assigned. Reserve life for new-hire flight attendants is not for the faint-hearted and is frequently cited as one of the most stressful aspects of the job for junior crew members. With few days off and little holiday time, it’s probably no surprise that some flight attendants are trying to maximize the amount of time they get to spend at home.
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