Last week, Reuters, citing anonymous sources, reported that United Airlines (UAL 0.68%) CEO Scott Kirby had presented a potential merger with American Airlines (AA 1.17%) to President Donald Trump at a late-February meeting.
Rumors of the deal, which would have created the largest global airline by capacity, sent American Airlines' stock surging higher.
But yesterday, American Airlines CEO shot down these reports, with a spokesperson issuing a statement that said, "American Airlines is not engaged with or interested in any discussions regarding a merger with United Airlines."
Image source: Getty Images.
That sent the stock lower, as investors believed that such a deal would have made American Airlines the acquisition target, given its lower market cap, leading to a premium offer on the current stock price.
Today, American Airlines stock is once again in the red, down roughly 3.3% in the final hour of trading. Here are two other factors dragging down the stock today.
Trump shuts the door on potential merger
American issuing a statement yesterday was reason enough to believe that a tie-up between the two airlines wasn't going to happen. Still, not all investors fully take companies at their word, so there might have been some holding out hope that a merger could still materialize down the line.
Trump seemed to close the door on this idea, saying, "But with American it's doing fine, and United is doing very well. I know the United people, they're doing very well. I don't like having them merge."
That statement alone might have sent any investors hopeful for a deal exiting the stock. The potential for a deal also drew criticism from a bipartisan group of U.S. Senators, so obtaining regulatory approval may have been difficult, if it was ever considered in the first place.
Another factor impacting American Airlines -- and much of the broader market -- is renewed tensions between the U.S. and Iran, which have driven oil futures prices higher.
NYSE: AA
Key Data Points
As of early afternoon, U.S. Vice President JD Vance had not yet left for Islamabad, Pakistan, to attend a new round of negotiations between the U.S. and Iran aimed at reaching a longer-term agreement that would end the war.
The U.S. and Iran previously entered a two-week ceasefire, which is slated to expire tomorrow, on April 22. However, the ceasefire has been fragile, with both the U.S. and Iran claiming the other violated the short-term agreement.
If the ceasefire is not extended or a longer-term agreement is not reached, oil prices are likely to soar again, further pressuring airline stocks like American Airlines, which have seen jet fuel prices surge.
Higher jet fuel prices will likely raise travel costs, potentially stunting consumer demand that had been shaping up nicely for the airline sector. Already, American, along with other major airlines, has increased fees for checked bags.
American Airlines is expected to report its 2026 first-quarter earnings on Thursday, which will provide investors with more details on pricing pressures seen in March and on management's view of the environment moving forward.
A lot can happen between now and then, so I expect the stock to be volatile this week.
