At present, the most captivating airline “rivalry” in the United States appears to be unfolding between American Airlines and United at Chicago O’Hare Airport (ORD). Both airlines maintain hubs there, but the situation has transformed. Ten years prior, American held the upper hand; however, United has substantially expanded its presence since then, relegating American to a far-off second position.
Now, American seeks to regain market presence in Chicago, prompting an increase in flight offerings, which concurrently leads United to boost its own flights. United’s CEO Scott Kirby has stated he’s “drawing a line in the sand” and will not permit American to further increase its market share at the airport. Kirby asserts that United’s expansion in Chicago is lucrative, whereas American is expected to incur a loss of $1 billion in the region by 2026.
United CFO ridicules American’s “temporary” Chicago hub
United’s CFO Michael Leskinen addressed the Barclays 43rd Annual Industrial Select Conference this week. Along with making intriguing comments about airline mergers, he discussed the escalating competition in Chicago, as highlighted by View from the Wing.
He faced questions from Barclays Analyst Brandon Oglenski regarding the circumstances in Chicago:
“Well, Mike, there seems to be a bit of a stir, if you want to characterize it that way, in your home city of Chicago between you and another airline that perhaps operates a hub there. Could you provide some context about what’s happening here and…”
Leskinen replied:
“Temporarily, they hold a hub.”
When asked to elaborate on United’s viewpoint regarding Chicago and how events might unfold, Leskinen stated:
“This is our hometown. This is where our headquarters are located. Many of our brand-loyal corporate customers are shifting from American to United, and they’re doing that because we offer a differentiated product and service. Thus, while there’s an increase in capacity to Chicago, not all added capacity holds equal value. We possess not only a superior hard product but also better scheduling, connectivity, and lounges.”
“So they can operate some empty aircraft, and there’s some logistical calculus around that. This situation necessitates us to safeguard our gate positions in the long run. It will have a slight effect on our profitability level. We’ve provided guidance, and I updated you on it today. As you can see, it’s not making much of an impact currently. I feel quite sure about our strategy. We are generating profits in Chicago. Last year, we realized a substantial profit in the area. The other airline, which is raising capacity so dramatically, is not doing so. There’s solid math available using public data to assess that. Therefore, you really ought to consult them. Accelerating losses represents an irrational strategy.”
United also shared a harsh presentation regarding the competitive landscape in Chicago, as noted by JonNYC. According to their claims, United anticipates remaining profitable in Chicago while forecasting that American will incur a loss of $952 million at the airport in 2026.
United leadership has done an impressive job, yet…
The management team at United merits significant accolades for the numerous changes they’ve implemented in recent years. I hold great respect for Kirby, considering him one of the most capable airline CEOs across the board. It’s commendable to observe an airline so dedicated, possessing a clear vision of its goals.
Currently, we understand that United is striving to increasingly align itself with Delta’s financial standing, and the airline has made commendable strides in that regard. However, it’s worth acknowledging that there’s still quite some ground to cover, since if we exclude the approximately $1 billion annual labor advantage United holds (due to unratified contracts), it sits almost precisely between American and Delta in terms of profitability.
That being said, the extent to which United’s management engages in disparaging remarks is somewhat unbecoming, in my view. While it’s certainly important to articulate one’s vision and strategy—something American management could take note of—this can be achieved without projecting an arrogant demeanor, in my opinion.
For instance, labeling American’s hub in Chicago as “temporary,” really? Even in its second-place status, American certainly maintains a hub in Chicago and will continue to do so, regardless of current conditions. Or implying that American can “fly around some empty planes?” Is that really required?
United’s management often speaks as if they’re in a reality TV show, attempting to gauge how much shade they can cast upon their competitors. While United’s leadership deserves recognition for their achievements, I believe many could do without the overt hostility.