The airline trade is very aggressive. As a lot as attainable, the “large three” carriers attempt to construct up fortress hubs, the place they dominate market share, and have quite a lot of pricing energy. Nonetheless, there are some airports that act as hubs for multiple airline, the place airways nonetheless discover it worthwhile to compete.
Maybe there’s none extra fascinating than Chicago O’Hare (ORD), which is a hub for each American and United. The aggressive dynamics listed below are fascinating, and I feel this is perhaps essentially the most fascinating market within the nation to observe in 2026. Particularly, feedback from United CEO Scott Kirby are about as excessive as I’ve ever heard, and spell unhealthy information for at the least one airline (if not two).
Background on American & United competing in Chicago
As talked about above, American and United each have hubs in Chicago. Going again a decade, the airways had been fairly even, however there’s no denying that United has massively taken the lead in current occasions.
That largely comes all the way down to United being rather well run and targeted, as Kirby is determined to enhance the corporate’s profitability. In the meantime American has had a very tough a number of years, dropping each enterprise vacationers and different premium vacationers, as a result of an absence of a technique.
What’s fascinating about Chicago isn’t simply the final shift towards United, but in addition the system in place that permits an airline to take the lead. Primarily, gates at O’Hare are allotted primarily based on historic utilization, with a weird system that additionally has a delay with awarding gates. So the concept is {that a} service’s service to the airport prior to now determines the quantity of flights it could actually function there sooner or later.
In current occasions, United has been allotted quite a lot of gates in Chicago, and has been rising market share. United executives declare that American is dropping huge quantities of cash on the airport (we’re speaking many a whole bunch of tens of millions of {dollars} per yr). For what it’s price, American executives have instructed that Kirby is exaggerating these numbers, and whereas they’re not claiming to make cash in Chicago, they are saying they’re not dropping that a lot.
Both means, Kirby has mainly written off American in Chicago, suggesting the airline is toast. American now appears to be able to battle once more, and a number of other weeks again, introduced plans so as to add over 100 new every day flights from Chicago, in order that it could actually as soon as once more get extra gates.
So, how will this all finish? You’d assume the winners could be shoppers, since there’s little question that that is going to result in some fare wars. Nonetheless, that’s not the narrative of United’s CEO, and I can’t assist however discover his commentary to be fascinating. Both United is about to tug off essentially the most stunning airline defeat in historical past, or Kirby goes to should eat his phrases.
United “drawing a line within the sand” with American in Chicago
Throughout yesterday’s 2025 earnings name, United CEO Scott Kirby was requested by Deutsche Financial institution’s Michael Linenberg concerning the aggressive dynamics in Chicago. He identified how American is including quite a lot of flights in Chicago, and quoted Kirby’s claims that American is dropping $700-800 million per yr on the airport.
So he requested if the elevated competitors goes to be a drag on United’s home yields, or how he sees that enjoying out. I simply should share Kirby’s response in full, as a result of yowzers:
I used to be afraid we had been going to get by the decision with out addressing Chicago. So I’m blissful to do it. And it’s in all probability a superb follow-up to the final query that I talked about. And I needed to start out with, at United Airways, we’ve been a decade-long technique to construct a brand-loyal buyer airline. That was all designed to get us out of the commoditized a part of the trade the place all that mattered was the schedule. And that meant in each — specializing in the product, the know-how and repair to get prospects to decide on us.
That’s been a very profitable technique. It didn’t occur in a single day. It actually has been a decade within the making, however you’ll be able to see the outcomes, and we’ve had market share will increase all over the place that we fly. In Chicago, to be particular, in 2016, American really had larger native market share with Chicago-based prospects and better share with enterprise prospects. In 2025, even in any case the expansion from our competitor, United now has a 22-point lead with Chicago-based prospects in Chicago and a 38-point lead with the brand-loyal enterprise prospects.
Being a brand-loyal airline simply actually inoculates us largely from that aggressive exercise. And in reality, in 2025, even with all that development, the Chicago RASM outperformed the remainder of the system by 1%, and we made a $500 million revenue. By the way in which, I feel we in all probability would have made $600 million. So it in all probability value us about $100 million. However our competitor misplaced $500 million although they didn’t begin that actually till Could, so larger on a full yr foundation.
As we enter 2026, there’s one other wave of development coming from that competitor. Largely that’s going to wind up precisely the identical because it did final yr, with one distinction. In 2025, American added gates. Meaning we watched it. We may have responded. We selected to not. They’re going to win 3 gates again at our expense when the evaluation comes out later this yr. We knew that was going to occur. We figured we’d simply let it settle into a brand new regular and that might all be advantageous.
However in 2026, we’re drawing a line within the sand. We aren’t going to permit them to win a single gate at our expense in 2026. We’re not attempting to win gates, however we’re going so as to add as many flights as are required to guarantee that we hold our gate depend the identical in Chicago. Look, we’re simply going to remain targeted. We’ve had the fitting technique on the complete community for a decade. We’re going to maintain doing it. It’s a successful technique. It’s working. We’re going to maintain doing that in Chicago.
For what it’s price, I feel that we are going to possible develop our earnings. Actually, we’ll make at the least the identical $500 million, I consider. And sure, we’ll nonetheless be capable of develop our earnings in Chicago for a similar causes it labored final yr. American, and we’re fairly good at estimating that is more likely to push to about $1 billion in losses in Chicago. However we’re going to only keep targeted on the technique that’s labored for the final decade. Our staff is doing an ideal job caring for prospects and it’s working for us.
Will this actually go so nicely for United and so poorly for American?
Kirby has little question accomplished a tremendous job shifting United in the fitting route, and he has additionally accomplished a superb job being a comparatively dependable narrator on United’s efficiency. A part of the rationale United’s inventory does so nicely is as a result of United really delivers on the expectations it units.
This example in Chicago is probably the most important uphill battle that United may face, as I see it. American will begin capability dumping in Chicago, with the objective of being allotted extra gates there, as a part of a much bigger long run technique. In the meantime United is saying it refuses to surrender any market share, so the airline will add as a lot capability because it must, with the intention to cease American.
Strategically, airways do that on a regular basis. They don’t thoughts dropping cash within the brief time period, within the hope of getting cash in the long term. What’s distinctive right here is that United is claiming it’ll do that whereas having the hub be at the least as worthwhile, if no more worthwhile, than it at the moment is?
So United claims it’ll make at the least $500 million in Chicago because it grows, whereas Kirby claims that American will possible lose $1 billion because it grows, mainly doubling losses? Everyone knows that United does higher than American financially, however is that actually how issues are going to play out?
Kirby all the time talks about United getting out of the “commoditized” a part of the trade, and more and more having “model loyal” prospects. This hasn’t really straight been put to the take a look at in that many markets, given the service’s concentrate on increase fortress hubs. So this Chicago scenario ought to show as the best take a look at of this up to now.
Will prospects select United over American as a result of model loyalty, even when American has decrease fares? There’s merely no different means you find yourself in a scenario the place two carriers would have such inverse monetary performances.
We’ll see. If Kirby is true, then this shall be one more huge strategic misstep for American, and can hurt the service’s profitability much more. We all know that Kirby thinks that American is cooked. But when Kirby is flawed — and it doesn’t take rather a lot for Kirby to be flawed right here, given his outrageously rosy perspective on capability dumping — then this may show that American isn’t fairly as screwed as Kirby has tried to counsel. Solely time will inform how this performs out…
Backside line
American and United have been competing in Chicago for a few years, however competitors is about to warmth up greater than ever earlier than. Over the previous decade, United has continued to achieve market share on the airport, at American’s expense. American now desires to reverse that, and is including over 100 every day flights.
Given the system for awarding gates on the airport, United claims it’s “drawing a line within the sand,” and received’t quit any extra market share to American. This clearly means we’re going to see an enormous quantity of capability dumping.
What’s shocking right here is that United CEO Scott Kirby claims that as this occurs, the service’s profitability in Chicago received’t lower, and may even improve. In the meantime he claims that American’s losses on the airport will double.
I don’t understand how that is going to play out. If Kirby is true, then United is solely unstoppable. If Kirby is flawed, nicely… he might need to eat some humble pie.
How do you assume this Chicago O’Hare scenario will play out?
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