Well this is going to have some major impacts on the battle we’re currently seeing at Chicago O’Hare Airport (ORD), between American and United….
In this post:
Chicago O’Hare flights will be reduced by 10% this summer
At the moment, both American and United are adding a lot of capacity in Chicago, and this is part of a battle between the two companies. Both airlines have a hub in Chicago, but United has taken the lead (by far) in recent years, and now American is trying to regain some market share. So in reality, we’re just seeing a lot of capacity dumping in Chicago over the coming months (and a lot of smack talk!).
In light of all of this, the Federal Aviation Administration (FAA) has revealed that it’s planning forced schedule reductions at Chicago O’Hare, which will apply for the IATA summer 2026 season (which goes from late March until late October).
To what extent should we expect flight cuts? Currently there are 3,080 planned peak day operations at the airport in summer, compared to 2,680 peak day operations during the same period last year. The FAA believes that this “increase is significant and would stress the runway, terminal, and air traffic control systems at the airport,” and proposes that instead, 2,800 peak day operations should be the cap.
That means roughly 10% of planned flights at the airport will need to be canceled. During a meeting in early March, the FAA will review the most congested times of day, where the most schedule reductions are needed. They’ll then meet with US carriers to discuss where they could most practically cut their service, before publishing a final decision.
This is good news for American, bad news for United
The whole reason that American and United are now battling so fiercely in Chicago is because of the airport’s gate allocation process. Airlines are allocated gates in the future based on historical usage, so both airlines are now trying to flood the market, so that they don’t lose market share to the other airline.
In theory, this battle between the two airlines is good for consumers, in terms of added capacity leading to lower fares. However, what would’ve been significantly less pleasant is the impact to on-time performance at the airport. Chicago O’Hare can be a bit of a mess on a good day (especially in terms of taxiway congestion), and with such an increase in service, it was going to get bad.
So how do airlines feel about this news? While I haven’t yet seen anything from United, American released the following statement:
American commends Secretary Duffy, Administrator Bedford, and the FAA for taking proactive action to ensure the operational integrity of the airfield and airspace in Chicago. The FAA now has the opportunity to achieve an improved customer experience for passengers traveling from, to, and through Chicago this summer.
Hah, indeed, as you can see, American views this as good news. I think United will feel differently, though:
- This Chicago growth wasn’t going to be profitable for American, especially in the short term; United believed it was a good opportunity to make a weak competitor even weaker, especially given that American is barely profitable
- American just cares about its proportion of flights at the airport compared to United, so I imagine American thinks it may even score an advantage here, when United has to cut more flights (due to its larger size and bigger growth plans)
We’ll see how this process works out, but I definitely think American is more enthusiastic about this than United.
Bottom line
The FAA has announced plans to restrict flights at Chicago O’Hare Airport this upcoming summer, given the amount of capacity that we’ve seen added in recent times, by both American and United. The expectation is that flights will need to be cut by around 10%, bringing them closer to last year’s levels.
Given the gate allocation process in Chicago, this development is definitely better for American than United.
What do you make of the FAA’s plans to cut flights in Chicago?
This is a wholesale indictment of UA and its strategies and a win for common sense where UA thought it would bully a competitor out of one marketplace. and they have said the same thing about multiple other markets; ORD just had the most concrete pathway for them to try.
This is now the second slap up the side of the head for UA after it melted down its operation at EWR and was forced...
This is a wholesale indictment of UA and its strategies and a win for common sense where UA thought it would bully a competitor out of one marketplace. and they have said the same thing about multiple other markets; ORD just had the most concrete pathway for them to try.
This is now the second slap up the side of the head for UA after it melted down its operation at EWR and was forced to cut flights.
This time, you can be sure that other airlines including AA and DL are not about to give one inch and they should not.
UA’s $1 million contribution to the inaugural party was clearly rejected.
UA can park about 180 50 seat CRJ550 flights/day and achieve all the FAA needs and more.
NK is managing to successful emerge from bankruptcy, AA’s survival at ORD just took a giant leap forward, WN is doing an outstanding job of emerging as a much stronger competitor, and DL’s A350-1000s are a year from arriving on property with deployment across Asia/Pacific markets.
UA is increasingly boxed in by better run and more strategically focused airlines even as UA employees will eventually wake up and quit drinking the Kirby Koolaid.
Anybody that could see through the noise could see that Scott Kirby was a testosterone driven bunch of hot air that has never demonstrated an ability to compete in the real world.
It is no surprise that the UA fan nuts are in full meltdown mode this weekend while I got to watch the sun rise from several thousand feet up w/ a profound sense of joy at how those that think they are high and mighty are debased. .
if United does not like this development, just create a new peace prize and send it to the White House.
I don't know why everyone keeps criticizing Chicago's gate allocation process. IMHO, it's the most consumer friendly system of all the big airports. Basically, the more you fly, the more gates you get, and the less you fly, the less gates you get. And the allocation is adjusted every year based on the past year's actual flights. There is no favoritism, no long-term gate squatting, etc.
What this actually incentivizes is not that you schedule...
I don't know why everyone keeps criticizing Chicago's gate allocation process. IMHO, it's the most consumer friendly system of all the big airports. Basically, the more you fly, the more gates you get, and the less you fly, the less gates you get. And the allocation is adjusted every year based on the past year's actual flights. There is no favoritism, no long-term gate squatting, etc.
What this actually incentivizes is not that you schedule as many flights as possible. It's that you schedule them *as efficiently* as possible. You don't lose gates by scheduling fewer flights. You lose them by scheduling fewer flights *per gate* that you're allocated. This is good for the airport: gates are expensive, valuable real estate, and whichever airline manages to utilize them most efficiently, should be rewarded with more gates.
Everyone keeps saying that the current scheme allows United to lock out American forever. Not at all. Whatever gates United gets this year, they must keep using them at the same utilization rate, or they'll lose them next year. They can't just capacity dump for a year, lock down gates forever, and then start cutting back. That's not how it works. Once you're given additional gates, you need to use them fully, or else you'll lose them next year.
For example, let's say there are 100 gates, with United given 60 and American given 40. If United schedules 600 flights and American schedules 400, then each gate is used for 10 flights, and the allocation is stable. If United manages to find a way to squeeze 700 flights into their 60 gates, then their gate utilization becomes higher than American. So they will be allocated new gates, until the utilization rate between American and United becomes the same. Note: this does *not* mean American can no longer fly their 400 flights. It just means, they must do so with the same gate efficiency of United. If they do, they'll maintain their schedule just fine, albeit with fewer gates. This forces airlines to become more efficient with their gates, whereas typical leases incentivize airlines to become less efficient: if gates are allocated on long-term leases, there's no incentive to actually use them, which means the city's investment in building those gates isn't being used to its maximum capacity.
You don't lose gates by having fewer flights, or else Delta and Southwest and everyone else would be completely eliminated. You lose them by utilizing them at a rate below the airport's average. I.E. that your operations are not as efficient as your competitors, and so you lose gates until your operations become as efficient. This is why United is looking at implementing a late night bank: it would allow them to increase their gate utilization, by scheduling flights when the gates aren't being used. American already has a late night bank, and they're looking at where they can add flights to their current gates.
This is actually the most ideal way for airports to allocate gates. It eliminates long-term gate squatting, boxing out competitors by controlling gates that essentially go unused, not to mention back-room dealing for long-term leases. It allows for the most flights available to the public, making the most use of the public's investment in a very expensive resource. The process is transparent, based on real numbers, that everyone has access to. Why exactly does everyone keep hating on it?
It’s complicated who wins and loses. United added a late night bank (presumably not a overscheduled time) so probably could keep that full bank.
And then they’ll have to figure out a way to allocate cuts across the peak hours of the day. I suspect United will have a slightly higher cut but it’ll be more even than we think between AA and UA on cuts received.
This is largely Chicago's fault. Their gate allocation scheme is idiotic and incentivizes over-scheduling at ORD.
Hopefully the FAA forces the city to come to the table too.
Good. This may have lowered prices in the short term (although unlikely on most routes since the flights they were adding were short-haul routes with low demand like Grand Rapids) but if United successfully cut AAs gate capacity that means less competition going forward and that's not good for consumers at all