United Airlines believes its competitors are “generations behind” and will never catch up, even if they begin investing in the customer experience.
United Argues Competitors Are “Generations Behind” During Q1 Earnings Calls
I always enjoy listening to the quarterly earnings calls, during which United’s C-Suite members take turns discussing various aspects of the business, then take questions from Wall Street analysts and the media.
This week, United discussed is 2025 Q1 results, which I covered here, in which United reported its best Q1 profit since 2019, slightly surpassed Delta Air Lines in terms of profitability, and offered a bifurcated profit estimate for the full year based on whether the United States economy entered recession.
> Read More: United Airlines’ Tale Of Two Profit Forecasts
One recurring theme in the earnings calls was the concept of brand loyalty, which I discussed here. United believes that customers are “sticky” and its varied fare product (ranging for basic economy to Polaris business class) and onboard investments draw people to United rather than to a carrier that may be slightly less expensive.
United CEO Scott Kirby has said, “But the real game in airlines is to win brand loyal customers. What I mean by brand loyal, these are people that fly a lot. They’re typically not out price shopping on every flight.” And per Kirby, what makes them loyal is the comfort and ease of the entire flight experience:
“Well, the schedule matters, but the schedule in most of those cases is equal between one or two airlines. So then their choice comes down to whose frequent flyer program do I like, whose club programs do I like, whose service do I like better, whose airplanes do I like better, I want to be on an airplane that has seatback entertainment, do I care about the Wi-Fi.
“All of those things go into the mix. And the important point about those customers is that they are sticky. Once they decide to switch to an airline, they tend to stay there for decades or beyond. They get the credit card, they tend to stay.”
> Read More: United Airlines CEO Thinks Customers Are “Sticky”
But United is not alone in investing in its product. During the call, an analyst asked, “How do you think about maintaining that brand loyalty leadership over a multi-year period if we’re seeing some of the other airlines also investing in some of the same capabilities?”
Andrew Nocella, United’s Executive Vice President and Chief Commercial Officer, answered the question:
“The only other thing I’ll add is the investments we’ve made, we’ve made over a really long period of time. Like it takes years to build these clubs. It takes years to refit the aircraft, with the appropriate LOPA’s, to invest in the Wi Fi technology. And while, it’s, I guess, a bit flatter in that others are trying to copy us, they are generations behind, in my opinion. And will never catch us. And we will continue to run as fast or faster to ensure that doesn’t happen.”
“Generations behind” is a strong statement, and I’m not sure I buy it. For example, American Airlines could theoretically make Wi-Fi free overnight and eclipse United, which is gradually introducing free Starlink Wi-Fi across its fleet. The bandwidth may not be able to handle it, but there are mechanisms like capping speeds that AA could use to more reasonably distribute the bandwidth.
American Airlines could also greatly improve its catering with just a couple of months of lead time…it just needs to properly budget for it.
But in terms of seatback screens? Nocella is correct. That would take years. Aircraft deliveries? Nocella is correct again…AA’s path to growth has been stymied not only by mismanagement but by aircraft delivery delays. New clubs? That’s also a multi-year project for every hub.
United sees Delta as its equal and everyone else as competition that has fallen behind. Is AA “generations” behind? I’d say it is a generation behind, not multiple generations. And I do think it can catch up…once Untied Next (the interior update program) is complete, what further onboard innovation will there be? United Next is, in a sense, just catching up with Delta, but once there are new seats, seatback screens, and modern plugs and lighting, there’s not much else to be done.
CONCLUSION
United thinks its competition, which I interpret as American Airlines, is “generations behind” and that even if it did improve, United will continue to improve such that the gap cannot be closed. I’m not sure that is correct, but I’m also not sure AA has the desire to try to mimic Delta and United as it tries to emerge from its malaise of stagnant growth. Yes, AA will have to compete on price for now…an approach that has not been working…but it is offering a better onboard product akin to United and Delta is not generations away at AA…more like years.
to really get ahead, they do need a longhaul F cabin.
Losing some of the very high end customers to LH and ANA, not to mention SQ
I would love this, even just one row of F. While it may not be the most profitable, it will lean into the luxury angle and compete if done properly against other *A First Classes. Perhaps they could install it on future A350s if they ever take delivery.
Something something joint ventures. United doesn’t need first class. About the only market that might work for United would be LHR. Otherwise Ana and LH cover that segment well.
You won’t need to hold your breath much longer …….
One narrative that Kirby always tries to push is that United is better than it actually is. The United Next planes are great- but there are still a lot of planes that need to be reconfigured– so they are still behind Delta in terms of in seat screens. And UA’s in flight catering still lags Delta, and arguably AA too for domestic meals. And the United Clubs? I’d rank the catering in between DL and AA so not necessarily the leader there either.
But I do appreciate that UA (unlike AA) actually realizes that both hard and soft product matters and is willing to make investments in both.
I assumed he was referring more to folks like Southwest, Spirit, Frontier who are saying they’re totally upending their pax-ex to chase premium revenue. They’re truly generations behind. AA, like you said, less so.
I’m just not sure UA ever has to worry about these players…I think AA could, if it reinvited itself in the right way, become a big concern for UA (and DL too).
It’s interesting that they compete with dozens of airlines over hundreds/thousands of city pairs and talk about customers who are loyal for decades yet at the same time they think they only need to worry about whether passengers will choose one specific competitor. If I am a ‘sticky’ traveller flying in business class between Europe and Mexico every three weeks, are they really confident that their mediocre food and convoluted connection process is ‘generations ahead’ of what’s offered by AF, IB, UX, AM…, or just not interested grabbing a share of the five-figure sum I spend every year? I don’t know which of the two is worse, but neither approach would convince me to invest in UA stock.
I find Delta’s service to consistently be better than what I encounter on United. When all things are close to equal on the hard product, this is an important distinguishing value proposition.
There are two themes that have marked Scott Kirby’s career since he took the throne at UA.
1. He consistently has been aiming to be like DL – he said 7 years ago he would match DL’s profits and financial performance. UA is probably as close as it will get right now and it has multiple open labor contracts which even UA execs admit will raise their costs. On a revenue basis, they are very close to generating revenues comparable to DL.
2. Kirby and the crowd of execs he brought from AA are convinced that UA can only succeed because others will fail. He has no more focus on any other carrier than AA – which passed him over for the CEO role there, landing him at UA. Yet, he had his hands all over some of the very strategies that have weakened AA and helped DL – including the DCA-LGA slot swap deal that pushed DL within striking distance of matching UA on flights from NYC, something they have now exceeded by 15%.
Kirby and co. know full well that loyalty begins with schedules and serving the right markets. UA and CO didn’t care about its domestic size, focusing instead on adding int’l cities that they still claim add value to their loyalty program but seem unable to prove.
The reality is that DL has developed the world’s richest airline loyalty program because it serves all of the country’s most important markets – with their position in Chicago obviously the weakest point on their network – and have a massive ability to serve thousands of connecting markets. UA is only now realizing that it has to be able to gain what AA and DL have in connecting the hundreds of small and medium sized cities to each other, big US cities and the world, something AA and DL do far better than UA.
UA’s weakness in Florida is more significant than DL’s in Texas where Dl is #2 at both Dallas airports, HOU and now AUS.
Kirby is a network guy and can fix UA’s domestic weakness via organic growth and mergers (if allowed) but DL will always be one step ahead.
Loyalty is first about network, next about reliability- which UA is quickly reaching near DL levels other than for baggage handling, and about product.
DL is simply far less focused on volume than creating a product that will support its high costs.
AA is simply incapable of delivering the product that will support high fares and it has allowed its presence in too many major markets – New York City, Chicago and LA – to be eroded that they likely can never regain the position they once held.
the real consideration is how well UA can attract and retain the high value passengers which are not carried by DL or UA. DL understands that much of the industry is not sustainable and it has an enormous advantage over UA in gaining those passengers.
@Tim, I largely agree but like to look at issues from a more personal angle than analytical. Kirby has recently said that he tried to do the same thing at AA that he is doing at UA, but that is not what I recall from his time at HP, US, and AA…a bit of revisionist history, perhaps. I do think that Kirby wanted to take over AA and the fact that Parker and Co. forced him out has been a huge driving factor in everything he has done at UA: a personal vendetta to show they were wrong and should never have let him go. And to be clear, that’s not just a vanity project…it is to UA’s advantage to copy Delta and the pie is big enough for at least those two. As you said, let’s see where UA stacks up once the labor deals are done. I have to imagine that any deal will include backpay, so it is curious to me why the two sides cannot strike a bargain. It’s inevitable…
I largely agree with you but Kirby’s hands were on some of the actions that caused AA to slide further behind. Either he did what he did to keep his job – we all have to do that at times – or he was bad at communicating the value of what he proposed to elevate AA.
It is absolutely in UA’s interest to copy DL – because DL has demonstrated better than any other legacy carrier how to succeed in multiple metrics. Kirby is smart and DL’s strategies are not patented.
I think the bigger theme is the competitive implications of having two strong airlines amid an industry where most of the rest of the players are failing or at best just getting by and vulnerable to smart players like DL and UA
keep an eye on next week’s earnings and guidance
Airlines can improve. Look at America West before and look at them now. Somewhat better. Look at Frank Lorenzo’s Continental disaster and look at Continental now. Even the logo of Continental is used on United planes. Look at disaster Korean Air Lines, renamed Korean Air. Before it was a safety hazard but much better now.
All the UA 1Ks I know, including myself, have either become free agents or switched to other airlines both because of the food/product and of course the frequent flyer program. How is a frequent flyer program supposed to be sticky if you gut it every year and since you no longer have a mileage chart people don’t know what they can actually get when they are ready to book a flight.
I don’t miss UA. Nor will I miss BA (which just gutted there program) as there are plenty of other airlines to choose from when I fly to/from the US.
That is a reasonable counterpoint, and I find myself in the same position as well…and I think the “head in the sand” mentality that the new coupon-book approach to the Chase cards is a good idea is foolishness.
If they have all left, I don’t see it. There are tons of 1Ks flying. And UAL keeps increasing the requirements (like a Black Mirror episode) since there are so many. Interesting to see how many will be around next year who spend at least $28,000 not including taxes. Maybe a few will spend $100k-$300k a year to get it. So they can just sit on an upgrade list that never clears and trying to use Plus Points that generally they cannot use either.
I thought the “generations behind” was referring to devaluations, in which case Delta still holds the lead but United is working diligently to catch up.
So interesting. I remember years ago it was United V American. Delta was the ‘also ran’ back then. The common denominator here? United. They have never been the bottom of the big three unlike DL or AA. And with Kirby at their helm, there is no doubt that they will remain there.
from a network standpoint, DL was the underdog until post 9/11. DL never was part of the Spoils conference when the US airline industry benefitted from regulation and close ties to the government. DL was the 6th largest airline in 1978 when the domestic airline industry was deregulated and became the largest airline by revenue and ASMs on its own metal – not regional carriers now.
DL’s growth outside of the SE came with the Pan Am asset acquisition in 1991 and the Western merger in 1987 but both of those never fully developed until post 9/11 as DL dug in further in the southeast as Eastern folded and then since eliminated any likelihood that any other carrier will ever meaningfully compete with them in ATL now that WN has pulled back after their AirTran acquisition.
as for service, DL was long a higher quality carrier than AA or UA; it frequently had the fewest DOT complaints until WN pushed to becoming a nationwide carrier.
many people don’t realize that DL and UA were talking during UA’s bankruptcy about a merger but DL was not willing to become unionized which would have likely happened given UA’s larger size.
DL wanted the Pacific and is still rebuilding post NW NRT hub. The A350-1000s will allow DL to be the most efficient US carrier in the ultra long haul market including deeper into Asia.
and if further consolidation comes, DL will move just as aggressively as UA will – and probably take a bigger stake. If UA can move beyond being the largest carrier in the world and, by some measures now (revenue) and total size (flights in NYC w/ a B6 merger), every other combination of existing carriers is on the table.
DL wants to address its relative weakness in Texas that came from closing its DFW hub and shifting resources to NYC and ATL; it isn’t a surprise that WN mgmt has a pretty short timeline to financially turn the airline around.
I have been baffled by the arrogance of United management on broadcasting its competitive advantages.
I would point out the United onboard meal offerings and United Club food offerings are generations behind its competitors.
I agree about Delta having more consistent customer service. Their lounges are WAY better than United’s but United’s app and doing good when something goes wrong are WAY better than Delta’s. So, for me it comes down to time and money between those two. I’m a million miler on United and am doing a status match to Platinum from Delta so we’ll see if I go for two million on United or a million on Delta…I’m about 700,000 away from both, so still a long way to go!
Doesn’t AA still have the youngest fleet? The only airline with power ports on every plane? And isn’t the flagship lounge and loyalty program top notch?
When United Express has no more CRJ200 they will be ahead. Until then, its all a facade.