Currently, Chicago O'Hare Airport (ORD) is probably the most fiercely competitive airport in the country. Both American and United have hubs there -- United has gained a huge advantage in recent years, though American is now trying to win back some of the market share it has lost.
The US economy is headed toward a deep, very painful, and prolonged recession that will be triggered by a partial or total debt default, made worse by a substantive retreat in foreign government purchases of US debt. The result will be a dust-bowl like Depression for American farmers, a sharp and very challenging pullback for the US-led tech sector (Chinese AI is significantly cheaper and more open), and a very high rate of unemployment in the US that will persist for several years. At that point, it won't matter who owns Chicago.
Oh please. If you think that foreign governments want the linchpin of the world financial system to default, which would be catastrophic for those very foreign governments, I’ve got a bridge in Brooklyn to sell you. Maybe China has some 100 year plan to turn the tables but they also have a billion and a half people that they need to worry about, which might throw a few wrenches into things.
American "exceptionalism", or extreme arrogance, is over. The future is going to look very different and American provincialism and its interpretation of the world, very passe. Enjoy your soup kitchens.
I don't really disagree with the doom and gloom macroeconomic predictions for the US economy, but I'm not convinced it'll all unravel imminently. The market can stay irrational for longer than you can stay solvent and all that...
@ Peter: For the last two decades since Bush Jr. became president, the US government has done an exceptional job on its own to speed up the decline of US power and influence on global stage, at the expense of its economy and middle class, without foreign contribution. No amount of reading will enlighten your knowledge of how Chinese government runs its country and protects its citizens. In the history of mankind, no country ever lifted 800M people out of poverty and is on track to become the world's economic powerhouse in one generation. It ain't luck. It has learned its lesson being unprepared in Trump's first presidency when he launched tariffs and other economic warfare against China. This time, China is the only country that did not send its high officials to the WH to "wheel and deal" with Trump. It has set up its own financial system so when the US is ready to block China from western Swift system, China will not be isolated in world trade . No countries want to buy US bonds because they have no confidence in US currency. Trump just bailed out Japan's weak Yen currency last month to prevent Japan from dumping its investment in US bonds on world market. If you understand how previous world empires fell, you will clearly see this country is traveling in the same path at nearly the speed of light, metaphorically speaking.
Woah, this thread got too pessimistic, even for me. (Peter, don’t worry about these folks.)
Ok, maybe you are right. And maybe you are wrong. Humanity has seen similar doom predictions for centuries and they rarely play out.
So your challenge is this... if this does not materialize substantially as you predicted within 5 years, will you return to apologize and eat crow? If you don't, it makes no difference as we will all know to ignore you as you lost all credibility.
It is not in Citi or AAs interest to pull out of Chicago because there are lots of HNWIs there that have AA credit cards, and so AA will not pull out of Chicago. It’s as simple as that. And that’s before things like cargo etc.
This is honestly a garbage analysis. While his RASM-CASM approach and estimate is reasonable, the asinine assumption that expenses equal UA’s $2.8B RASM-CASM is a ridiculous assumption.
What’s even worse is that this Twitter warrior plugs in UA’s $2.8B expense assumption for AA even though AA is ~20% smaller than UA at ORD.
Is there any world in which United and American would cooperate in terms of the regional feed from the surrounding midwest? There's a good point that there's a large amount of service duplication to ORD from Madison, Milwaukee, Appleton, etc. While they do cooperate during IRROPS (AA has accommodated me on a UA feeder to ORD during a delay so that I wouldn't miss my connection). wouldn't it be more efficient to have shared mainline service to Chicago?
Kirby knows United (UA) faces future cost problems because of UA Next, new labor deals, & competitive pressures, which is why he is touting a mega-merger with Delta (DA) or American (AA) or an ORD takeover. DA & AA know this too.
Before reaching a new contract with its flight attendants, UA had about an $800 million annual labor cost advantage over DA & AA. With new labor agreements pending, UA's advantage will disappear. In addition, UA is currently implementing "UA Next," the airline’s most aggressive fleet renewal initiative to date, with over 800 aircraft due to be delivered from 2025 to 2032.
By comparison, AA took delivery of about 1,000 aircraft from 2015 to 2025, and its debt ballooned to about $54 billion. From Mar. 31, 2021, to Mar. 31, 2026, AA reduced its debt to $34.7 billion, or $19.3 billion in 5 years, or about an impressive $1 billion per quarter.
Boeing & Airbus do not disclose new aircraft purchase prices, but UA is expected to add about $60 billion in debt from new aircraft deliveries. Per UA's SEC Q2 10-Q report, the carrier has about $24.3 billion in debt. That's $84.3 billion or more than twice AA's current long-term debt.
When you look at UA's ballooning labor costs, old aircraft maintenance expenses, and facility fees, coupled with its debt, Kirby must find additional revenue streams or his debt will skyrocket past DA & UA within the next 6 years.
UA mechanics have been making industry-leading pay rates all along due to a 'me too' clause, the FAs contract was complete with retro pay fully accounted for during Q2 2026. 4 of 7 IAM contracts are complete.
UA got historic deals because of their massive aircraft orders during Covid to the point that deliveries are accretive meaning they will add more value to the company than they cost to acquire, ultimately boosting overall corporate profitability and EPS. A recent aircraft financing deal indicates that UA received 65% discounts off aircraft list prices compared to the usual 40%-60% for major airlines. There is no comparison to AA's aircraft orders or their massive debt-driven share buybacks for that matter.
UAL has disclosed on a number of occasions that they expect double digit margins in 2027 and an investment grade debt rating in the near future.
There is an international airport, the third largest in Illinois, only 60 miles from ORD. It's already becoming a UPS cargo hub. Some day, a creative thinker with capital will figure out how to make it a hub for Midwest passengers now tortured with ORD connections en route to the largest six or eight domestic destinations -- for example, MIA, DFW, LAX, LGA, ATL, DEN, PHX, and SEA. Just as convenient, also, for perhaps a million people originating in Chicago's west suburbs. American and United could even do a joint venture, but that would make too much sense.
Regional Compact failed, 30 years ago. Allegiant failed in 2012. Different demographics on the South Side, but mostly a lack of imagination and capital. Allegiant is flying to eight destinations, without any feeder network.
This analysis claims that UA out yields AA on even ORD to DFW, in contrast to CLT or MIA. Seems odd given DFW is AA's largest hub.
Do you think Scott Kirby also got his number by asking ChatGPT?
With AA’s (at best) break even financial performance and the strong profitability of DFW and CLT, it makes sense that hubs like ORD would be a major drag on the financials.
Not sure if it’s in the billion dollar range, but definitely a drag on the numbers, especially if MIA falls in the “profitable” category.
Big question can UA or AA will survive in Chicago ? Most of big companies moved or moving out of Chicago. Its the business customers which drive airline business. I donot think anyone is going to expand services from Chicago
AA is toast. Kirby’s prediction that they’ll let go of ORD as a hub isn’t that outlandish…
"He used AI for the analysis"
That's where we can stop reading. AI is a hype, a bubble, just like the internet bubble of the early 2000s. You remember, when some loud mouthed 'visionaries' predicted that supermarkets would disappear as everyone could just download their yogurt? AI is simply too immature to be used reliably by the general public. Just look up the accounts of Father Phi to get some examples of how most AI models fail spectacularly at very simple tasks.
"Hey ChatGPT, how many days of the week contain the letter y?"
"Hello, and thank you for asking. I will be happy to assist you. Only two days of the week contain the letter y, Monday and Friday."
So, if a simple task can't be completed by a robot, then why trust it with something much more complex? Especially when you don't know when the underlying model and data were last updated, and without access to raw data or detailed insight information that's required to understand how the aggregated surface level reports were made?
Once the AI bubble bursts and the US keeps its current economic course with gross overspending, then a new Great Depression is unavoidable. No one is buying US bonds anymore, the US has no allies left that want to take a risk there. So then the country will default. And then it doesn't really matter anymore who flies out of ORD, does it?