United Airlines and Delta Air Lines are steering their companies through a competitive aviation landscape, where hiring challenges, customer preferences, and shifting market dynamics are becoming increasingly prominent. With the aviation industry grappling to keep pace with demand, United Airlines CEO Scott Kirby emphasized that “the aviation industry can’t hire fast enough.” He stressed the extremely important role qualified personnel will play as airlines continue their push to expand their services.
The landscape of American air travel is dominated by four major carriers: Delta Air Lines, United Airlines, American Airlines, and Southwest Airlines. Combined, these three carriers make up about 75% of the domestic capacity, a dangerous level of industry concentration, giving so much power to so few. As these airlines continue to innovate in response to increased consumer demand, they are taking advantage of many proven techniques to improve their product and revenue.
United Airlines has announced plans for assigned seating and extra-legroom seating that costs more. This strategic shift is another bid to attract travelers looking for a more comfortable flight experience. Kirby is convinced that these improvements will increase the airline’s ancillary revenue stream. That’s the cabin that’s generating very good returns and the one that we’ll probably lean more into going forward.”
The third-largest domestic carrier, Southwest Airlines, announced that it would move in the opposite direction by scrapping its long-time open seating policy. This change is intended to make the boarding process quicker and more pleasant for customers. The introduction of checked bag fees for many customers in May reflects Southwest’s strategy to adapt to changing business realities as well.
And yet, in spite of these tactical changes at the strategic level, the state of airfares nationwide hasn’t been very favorable. Fares are actually down 3.5% year over year for June. At the same time, inflation rates continue to rise. This increase in pricing has sparked fears that domestic leisure travel demand from the more price sensitive travelers may be softer than expected.
In light of these realities, the four largest U.S. carriers are already shifting their capacity strategies in order to adapt to a new demand environment. Delta Air Lines and other competitors have announced intentions to scale back their capacity plans following the summer travel season. Kirby highlighted the need for flexibility in these plans. He cautioned that “United Airlines’ reduced 2025 outlook is not without an upside surprise from a jump in short-term demand this quarter.”
Having segmentation, or different offerings within cabin classes, is obviously required to serve multiple needs from customers. Delta’s chief executive Glen Hauenstein stated, “The segmentation that we’ve done in main cabin is kind of the template that we’re going to bring to all of our premium cabins over time because different people have different needs.” This move towards personalization would lead one to believe that airlines are truly in tune with changing consumer demand.
Industry movers and shakers aren’t quite ready to pop the champagne over their game-changing amendments. As Conor Cunningham said, “It can’t be exceptional forever. What goes up must come down.” His remarks suggest a healthy dose of skepticism about the hyper-growth and hyper-evolution being witnessed today in the airline industry.
Despite all that, Delta and United remain very bullish about the remainder of the year. In a historic context, they have both greatly reduced their long-term forecasts. This stands in stark contrast to an escalating fear of lack of sustained growth in a rapidly changing marketplace. As Kirby noted, “One thing that’s becoming even more clear is the strength of the two brand loyal airlines really winning and everyone else losing.” This revelation highlights the stressful competitive realities that both airlines are under as they fight for their respective market shares.