WASHINGTON, D.C.: A proposed tie-up between United Airlines and American Airlines could dramatically reshape the U.S. aviation sector, but analysts and regulators warn it may come at the cost of higher fares and reduced competition.

The potential deal, pitched by United Airlines CEO Scott Kirby to U.S. President Donald Trump in late February, would create one of the largest airline groups globally, combining two of the country's biggest carriers.

While details of the proposal remain unclear, the prospect of such a merger has already raised concerns among antitrust experts, policymakers, and consumer advocates.

"This seems hopeless to me. There are huge overlaps on a number of routes and in various metropolitan areas (such as Chicago). No amount of divestitures would fix it," said William Kovacic, director of the competition law center at George Washington University.

Shares of American Airlines rose seven percent in morning trading following reports of the proposal, while United gained about two percent. Other carriers also advanced, with JetBlue up 9 percent, Alaska Air rising seven percent, and both Southwest Airlines and Delta Air Lines gaining around 6 percent, aided by falling crude oil prices.

Analysts said investors view the potential merger as a rare positive development for American, which has struggled with profitability and cost control in recent quarters.

"In terms of valuation, we imagine American would anchor to their unencumbered asset base of over US$14 billion and argue for a valuation over $20/share, though (we) wonder if that is realistic, given how much their leverage would alter United's risk profile," TD Cowen analyst Tom Fitzgerald said.

A $ 20-per-share valuation would imply a premium of about 78 percent over American's recent closing price.

However, regulatory challenges are expected to be significant. U.S. antitrust authorities, as well as state governments and private litigants, could all play a role in scrutinizing or attempting to block the deal.

States have taken a more active role in merger enforcement in recent years, and competitors or even customers could also pursue legal challenges. Officials in Illinois and Texas, home to United and American, respectively, did not immediately comment.

Before any divestitures, the combined airline would control 50 percent or more of domestic capacity at 159 airports, highlighting the scale of market concentration such a deal could create.

"A United-American deal would reduce the 'Big 4' to a 'Big 3' with one dominant player. There would likely be competitive issues in many city-pair routes and hubs," said antitrust lawyer Andre Barlow of DBM Law Group.

"I am not sure this deal can get done. The Trump administration is concerned about affordability issues, and this deal would reduce choices and give the airlines more pricing power, which means higher fees for consumers, so I would think this would get a rigorous review," he added.

The U.S. airline industry has already undergone significant consolidation over the past two decades. However, more recent merger attempts, such as JetBlue's proposed acquisition of Spirit Airlines, have been blocked by regulators.

Lawmakers have also raised concerns about rising travel costs and declining competition. Consumer advocates argue that major carriers have increasingly avoided competing on price.

At the same time, industry group Airlines for America has said consolidation has helped reduce costs and expand connectivity, citing data showing airline ticket prices fell 1.5 percent between 2019 and 2024, even as overall consumer costs rose 23 percent.

The timing of the proposal also comes amid pressure on airline stocks from rising fuel costs linked to the Iran conflict. Since late February, American's shares have fallen 14.1 percent, while United's are down 10.4 percent.

Industry executives have warned that sustained high fuel prices could squeeze margins, limit capacity growth, and intensify financial strain on weaker carriers.

Kirby raised the merger idea during a February 25 White House meeting at Washington Dulles International Airport, just days before the conflict began. He argued that a combined airline would be better positioned to compete internationally, where foreign carriers dominate long-haul capacity despite strong demand from U.S. travelers.

Still, industry officials say the scale of the proposed deal and its potential impact on competition, pricing, and employment mean it would face intense scrutiny from multiple fronts before any approval.

American Airlines did not immediately respond to a request for comment.