As anyone who follows the US airline industry knows, Delta is the most profitable US carrier, United is the second most profitable US carrier, and everyone else is quite a ways behind.
It’s only in the past few years that United has started to get into Delta’s league, and leave American in the dust. We know that United CEO Scott Kirby desperately wants his airline to overtake Delta. So along those lines, he was asked a question about that, and his answer was surprisingly measured… sort of.
Scott Kirby says United beating Delta isn’t a priority
On the earnings call following United’s Q2 2025 financial results, JP Morgan analyst Jamie Baker asked Kirby about how he sees United overtaking Delta, and what that would look like:
“Your primary U.S. competitor has a significant nonunion labor construct. It’s got one of the most efficient hubs in the country. It’s got a sizable MRO. It’s got perhaps the most evolved relationship with its loyalty partner. And to your credit, Scott, I mean, you’ve spoken publicly about holding Delta in high regard. So my question is, what are the catalysts that potentially allow United to overtake Delta margins in coming years? Is it structural? Is it simply brand preference or perhaps you reject the premise that you can have the industry’s highest margins, but I doubt that’s going to be your answer.”
Here’s how Kirby responded:
“I appreciate the question. But what I’d say is I do respect Delta. In fact, on a conceptual level, much of what we’ve been trying to do for the last 15 years at the airlines I’ve been at is win brand loyal customers. And I think they were one of the first airlines, maybe the first in the U.S., to really prove that winning brand loyal customers was the winning formula for airlines. But my focus is entirely on returning United Airlines to solid double-digit margins and higher absolute margins as opposed to what we do relative to Delta.”
“I think we are the only two airlines that have a — we’re the only two brand loyal, revenue diverse airlines. I think that is structural. It is permanent. We can talk in more detail about why. It is not copyable by anyone else. And we already generate the bulk of the industry profits. I suspect when you hear earnings results next week, despite the challenges that Delta had last year at CrowdStrike, we have this year, there’s going to be those ups and downs that our margin gap to the two of us, our margin gap to the industry is going to continue to expand.”
“And I think we’re going to wind up in the same ballpark on margins. You mentioned some of their advantages. We have some advantages as well. Our hubs are better. Atlanta is a great hub, but collectively, our hubs, I think, are better. They’re in bigger cities. We have better international gateways in San Fran, Newark and Dulles in particular. So I think those are going to largely balance out. We’re going to wind up with similar margins. But I’d much rather us have 13% margins and Delta have 13.5% than us have 10% and Delta have 9.5%.”
“And everything we’re doing is 100% focused on winning brand loyal customers and creating a great airline that customers are going to choose to fly because that is going to maximize our absolute margins. And this quarter is another — like this first half of the year, it’s remarkable to me, everything that’s happened this year that we’ve grown earnings and margins for the first half of the year. And our guidance is for earnings to be down a little bit this year given everything that has happened.”
“But we have a shot at actually growing earnings this year, which would be a truly incredible result and proof point that winning brand loyal customers was the right strategy. We started it a long time ago. You can’t flip it overnight. The two of us have the right strategy, and we are going to generate the bulk of the industry profits.”
What should we make of Kirby’s answer about Delta?
Kirby made a few interesting points with how he answered this question, so let’s talk about that a bit…
First of all, Kirby claims United’s focus is on absolute margins, rather than on specifically beating Delta. In other words, he’d rather that United have higher margins while not beating Delta, rather than having lower margins while beating Delta. Fair enough, though personally I think he’s more motivated competitively than anything else, and I’m not sure he cares as little about beating Delta as he admits.
Second, I’m not sure I agree with his claims about the Delta and United advantages being “structural,” “permanent, and “not copyable by anyone else.” Sure, maybe other airlines can overtake Delta or United in the next couple of years. But as we’ve seen over the years, nothing in the airline industry is permanent. I suppose it’s “permanent” in airline speak, the same way that change fees are eliminated, before being reinstated.
Earlier this year, Kirby talked about why he thinks American can’t become a premium airline, and the logic is along the same lines — he essentially thinks that Delta and United have built moats around their businesses. I think that’s a bit too much confidence.
Third, it’s noteworthy how Kirby states that everything “balances out” between Delta and United based on United having “better” hubs in bigger cities, which are better long haul gateways. In many ways, he doesn’t actually answer the question that was asked.
Delta is still ahead of United financially, and Kirby doesn’t offer any vision for how financial performance will improve in comparison to Delta, other than “winning brand loyal customers.” And I guess that goes back to the first point, which is why he’s focused on absolute margins, rather than sharing a vision for how United will beat Delta.
Bottom line
United CEO Scott Kirby is an interesting guy, and he was asked about his strategy for catching up with Delta, given the Atlanta-based carrier’s advantages. Kirby wouldn’t admit that he cares about beating Delta, but rather, said he is focused on United’s absolute margins. We’ll see how this all evolves, but I found the comments to be quite interesting…
What do you make of Kirby’s comments on United narrowing the gap with Delta?
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