Why United Airlines Stock Lost Altitude Wednesday

Investors didn't seem all that willing to board United Airlines (NASDAQ: UAL) stock on Hump Day, following speculation that it might be trying to partner with a peer carrier. The company's shares traded down marginally in consequence, on a day when the bellwether S&P 500 index landed slightly in positive territory with a less than 0.2% lift.

Partners in the air?

On Tuesday night, Reuters published an article stating that United has been negotiating a potential tie-up with New York-based airline JetBlue (NASDAQ: JBLU). Citing three unidentified "industry sources familiar with the matter," the article claimed that the latter company continues to desire a partnership following the 2023 demise of its Northeast Alliance (NEA) with American Airlines Group.

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The U.S. airline industry is fairly concentrated at the top, and federal antitrust officials have been eager to quash tight collaborations between prominent airlines. This impulse was at the heart of the Justice Department's fight against the NEA.

According to the sources of the Reuters article, the potential United-JetBlue partnership would differ substantially from the NEA. It's envisioned as being more limited, they say, as the pair don't plan to coordinate on key aspects of the business such as schedules and pricing.

However, they added that United and JetBlue have not completed their deal, and its details are thus subject to change.

Frowns from the feds

While neither United nor JetBlue has directly commented on the report, the latter's president, Marty St. George, seemed to address the partnership obliquely. He admitted in the airline's most recent conference call that JetBlue was in talks with an unnamed U.S. airline boasting a larger network. He said that an announcement on the matter was expected at some point this quarter.

Such collaborations can be beneficial to both parties for sure, the only sticking point is regulatory oversight. Investors are right to be concerned that the larger United might be spending much time and effort on a partnership that federal officials could try hard to shut down -- as they have in the past.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.