American Airlines Continues to Struggle in Competition with Delta and United
The competition between American Airlines and the two other global U. S. airlines, Delta and United, has been a long-standing issue. On Delta’s recent earnings call, CEO Ed Bastian stated that 60% of the overall industry profits are expected to be driven by Delta, with United following closely behind. This leaves very little space for American to report a profit on their upcoming earnings call on Thursday, October 23.
American Airlines has consistently been in third place, also known as “bronze metal syndrome,” in comparison to Delta and United. In the third quarter, Delta reported a pre-tax margin of 9. 8% and United reported 7. 8%, while American is expected to continue to trail behind. In the second quarter, American’s pre-tax margin was 5. 8%, compared to Delta’s 11. 6% and United’s 11%. This trend has been seen over the years, with American consistently lagging behind in terms of stock performance as well.
Like Delta and United, American is also focused on enhancing revenue from premium seating, particularly in the leisure market. This has proven to be successful as many wealthy individuals continue to travel, often to more exotic destinations. On United’s third quarter earnings call, Chief Commercial Officer Andrew Nocella stated that the quality of premium leisure business often exceeds that of traditional corporate business, which has been the primary source of airline profits.
Analysts predict that American will follow in the footsteps of Delta and United, emphasizing their premium, corporate, and international markets to offset weaker domestic main cabin demand. They may also highlight their reduced domestic industry capacity as a potential catalyst for a stronger domestic revenue per available seat mile (RASM). Additionally, they may consider trimming unprofitable capacity in order to narrow the profit margin gap between them and their competitors.
The Allied Pilots Association, representing 16,000 American pilots, believes that American will continue to express their commitment to improving and catching up to Delta and United. However, the question remains as to whether their path forward will be a straight one or a winding one, and how long it will take for them to catch up.
There are three key points that American may address on their upcoming earnings call. First, they signed a credit card deal with Citibank in December 2024, which will give them exclusivity and the ability to fully compete with Delta and United’s credit card partnerships. Second, American’s dominance in Latin America, particularly through their Miami hub, may give them an advantage in the third quarter. Finally, American recently announced their plans to introduce the Airbus A321XLR into their trans-Atlantic service, which will open up new opportunities for the airline.
Overall, American Airlines will likely echo the talking points of Delta and United, while also addressing their own unique strategies and strengths.