An article in Forbes asks if United Airlines has surpassed American Airlines as the #2 airline in the USA. One veteran analyst says YES while one CEO says NO WAY!
We can guess the CEO. That would be Doug Parker of AA. The analyst is Jamie Baker of JP Morgan, a well-respected airline analyst. During an AA earnings call on July 26th Baker raised the question.
We all remember a time when United couldn’t punch its way out of a paper bag, when they were the perennial last-place member of the big three. What I’m being asked right now from investors is whether American has now simply stepped into the shoes that United once occupied. Maybe that is simply the construct of the industry going forward. You’re going to have one chronic outperformer, let’s call that Delta, in fairness. You have the silver medalist, let’s call it United, and then inevitably American brings up the rear. So, how do you push back on that?”
Parker was visibly annoyed, initially stating only, “We vehemently disagree.” That’s not much of a defense.
He later added:
Our competitors are doing a nice job, and one of them, in particular, had a lot more upside for a lot of reasons than we did. But that doesn’t mean that we think we’re not going to do exactly what we plan to do, which would [to become] the best airline in the world.
How do you measure how big an airline is? Profit? Share price? Passengers traffic? United’s share prices have shot up 21% this year while American’s have slipped 26% (Delta is down 3% and the market is up about 6% this year). American’s operational performance is also lagging behind that of Delta and United.
But American is still #2 and even #1 in many metrics. It has 118,000 employees while Delta has 80,000 and United 83,000. Its market cap is $23.9BN compared to United’s $23.1 (Delta is 34.4BN and Southwest is at 30.2BN). It also carries more passengers than Delta and United.
But Baker’s point is well-taken: United is on the rise and American seems to be on the decline.
It’s so easy to Monday morning quarterback…I can point to at least once instance where I should have been much more articulate myself. I also think of Popular from Wicked.
When I see depressing creatures
With unprepossessing features
I remind them on their own behalf
To think of
Celebrated heads of state or
Specially great communicators
Did they have brains or knowledge?
Don’t make me laugh!
They were popular! Please –
It’s all about popular!
It’s not about aptitude
It’s the way you’re viewed
So it’s very shrewd to be
Very very popular
Parker does need to focus on selling his airline…it is indeed very shrewd to be popular. But ultimately, operational performance, happy employees, and a strong route network are going to be the most important priorities in keeping AA #2 or pushing it to #1.
image: Glenn Beltz / Wikimedia Commons