BYOMSPM

U.S. airlines dominate the list of the largest airlines worldwide by revenue (1-Delta; 2-American; 3-United; 8-Southwest), yet the industry experiences infamously tight profit margins and high levels of competition. As a consumer, I’ve experienced distinct variations in the quality and style of service on each airline, but I wanted to understand more about what differentiates these airlines and gives them competitive advantages that allow them to each stay in the game.

Grade I gave myself for this assignment (90/100 – it’s decent)

Competitive Advantages of Some Major U.S. Airlines

Delta Airlines (CEO = Ed Bastian; 2023 Revenue = $54.69B; 2023 Profit = $4.6B) is currently the largest airline in the world. What has allowed the airline to achieve such a dominant market position?

• First and foremost, Delta has forged partnerships with large companies for their corporate travel, which is both stable and profitable (Janik & McAuley).
• Delta also owns their own refinery (Monroe Refinery), so they get a cost advantage of approximately 5 cents per gallon on jet fuel (Janik & McAuley).
• Delta’s main hub is Atlanta, which is within a 2 hour flight of 80% of the U.S. population (Janik & McAuley).
• Though this wasn’t necessarily cited in anything I read as a competitive advantage, Delta is also the oldest airline in the U.S. (Janik & McAuley).
• Delta has also put a huge emphasis on customer service and customer experience: they have a 20 minute bag guarantee, seatback TVs on almost all of their planes, and, apparently, noticeably strong customer service (Nilson).

American Airlines (CEO: Robert Isom = 2023 Revenue = $52.79B; 2023 Profit = $822m) is currently the second largest airline in the world, though it is the airline that carries the most passengers per year worldwide (Nilson). How is American aiming to differentiate themselves in the market?

• The most important factor that I read about was that they center their flights around their hubs (in this case, hubs = high connection traffic vs. just straight passenger count). Throughout 2020, around two thirds of all American flights departed from or arrived to one of their two major hubs: Charlotte & Dallas/Fort Worth. Horton explains that “each additional flight at a hub generates more connecting opportunities at only incremental costs, driving margin growth” (Horton).
• American Airlines’ Investor Relations financial report from 2021 highlights that their 3 strategic pillars that year were creating a world-class customer experience, making culture a competitive advantage, and investment in environmental improvement. Whether these have actually led to a competitive advantage remains to be seen (American Airlines)
• The ways that Schlappig notes American has put an emphasis on customer experience includes the possibility of dining, lounge, and exclusive cards for premium customers, the AAdvantage rewards system, and partner ticket deals.

United Airlines (CEO = Scott Kirby; 2023 Revenue = $48.82B; 2023 Profit = $940m) is the third largest airline in the world. What sets United apart from other major airlines?

• United has strategic alliances with other airlines and business partners worldwide.
• United is also, arguably, the most globally connected route network, with flights to the most locations around the world (Shlappig).
• United has a great rewards program, where customers can earn miles for purchases and redeem them for valuable rewards (Schlappig).
• The United app is much better than some other airlines, including American, with high usability and lots of functionality (Schlappig).

Southwest Airlines (CEO = Robert Jordan; 2023 Revenue = $26.09B; 2023 Profit = $267m) is the fourth biggest airline in the U.S. and the eighth largest in the world. What keeps Southwest in as a contender for prime market position in the U.S. airline industry?

• First and foremost, Southwest stands out, among other customers who I’ve informally interviewed, as more “different” than other major U.S. airlines. They have an open seating policy. They allow 2 free checked bags. Their site is extremely friendly towards flight changes and cancellations. All of this creates a very strong brand name for the airline.
• Southwest also employs some innovative logistic planning: instead of relying on a hub-based model of planning flights, Southwest crafts their flight plans point-to-point, seemingly reducing plane idle times (O’Marah).
• Also differentiating it from other major U.S. airlines is the fact that Southwest aims to be a low priced airline despite it being one of the largest in the country (Investopedia).
• In line with Southwest having a major focus on customer experience, they have put a heavy emphasis on recruiting and hiring people that fit into their culture and mission (Investopedia).

JetBlue (CEO = Joanna Geraghty; 2023 Revenue = $9.62B; 2023 Profit = I believe this was negative) is one of the smaller airlines in the U.S., but I wanted to highlight it because I think it’s employing some interesting tactics to make a name for itself.

• JetBlue has started offering a few coveted trans-Atlantic flights with their long Airbus 321. Even with only a few trans-atlantic flights, they seem to be competing on price (Rowland).
• JetBlue boasts the most leg room in economy (I recently took a JetBlue flight and I can completely attest to this).
• JetBlue offers free wifi for all passengers on all flights, which no other airline does (to my knowledge).
• Lastly, I noticed that JetBlue is aiming to offer a more customer-centric snack and beverage service than other airlines – there are more options for free snacks than on other airlines, and there is a “pantry” counter that houses free snacks and water for the duration of the flight, in contrast to the limited snack and beverage services of other airlines.

Overall, there doesn’t seem to be that much that differentiates each of these airlines. What I didn’t explore a lot in this post were the pricing models of the different airlines, which could make a big difference in their profitability and reputations.

Thanks for reading!

---

Works Cited

American Airlines. “American Airlines Reports Second-Quarter 2021 Financial Results.” American Airlines. 22 July 2021. https://americanairlines.gcs-web.com/news-releases/news-release-details/american-airlines-reports-second-quarter-2021-financial-results.

Horton, Will. “Why American Airlines Is Growing Twice As Fast As Delta And United.” Forbes. 28 June 2020. https://www.forbes.com/sites/willhorton1/2020/06/28/why-american-airlines-is-growing-twice-as-fast-as-delta-and-united/?sh=336563702c6c.

Janik, Max and McAuley, Shawn. “Delta Air Lines, Inc. (NYSE: DAL).” UConn. 18 February 2018. https://smf.business.uconn.edu/wp-content/uploads/sites/818/2018/02/DAL.pdf.

Nilson, Peter. “The top 10 largest airlines by revenue.” Airport Technology. 29 February 2024. https://www.airport-technology.com/features/the-top-10-largest-airlines-revenue/?cf-view.

Rowland, Becca. “COMPETITIVE ADVANTAGE: JETBLUE’S STRATEGIC MOVES ON THE TRANSATLANTIC.” OAG. 23 March 2023. https://www.oag.com/blog/competitive-advantage-jetblue-aviation-analysis.

O’Marah, Kevin. “Southwest Airlines Meltdown: A Supply Chain Management Perspective.” Forbes. 30 December 2022. https://www.forbes.com/sites/kevinomarah/2022/12/30/southwest-airlines-meltdown-a-supply-chain-management-perspective/?sh=17a322b53166.

Schlappig, Ben. “12 Things United Airlines Does Well.” One Mile At a Time. 25 October 2022. https://onemileatatime.com/insights/things-united-airlines-does-well/.

Schlappig, Ben. “10 Things Delta Air Lines Does Well.” One Mile At a Time. 28 October 2022. https://onemileatatime.com/insights/things-delta-does-well/.

Schlappig, Ben. ” 12 Things American Airlines Does Well.” One Mile At a Time. 25 November 2023. https://onemileatatime.com/insights/things-american-airlines-does-well/.

The Investopedia Team. “How Is Southwest Different From Other Airlines?” Investopedia. 10 September 2021. https://www.investopedia.com/articles/investing/061015/how-southwest-different-other-airlines.asp.