United Airlines has been flying people for nearly a century. And it's grown to be one of the biggest operators in the world. In 2023, it flew over 160 million customers. It serves 348 airports globally, with a fleet of 1,375 planes, 106,000 employees, with over 4,500 flights a day. But when it comes to profitability, it's still chasing that number one spot. The biggest competitor that United has right now is Delta. Delta has been at the top of the industry for a long time. It's the most profitable, has the best margins. We haven't exactly achieved the number one profitability status in the industry, but I know we're on our way. It's really front of mind for all of us. It's a very large legacy airline. I do think the last seven years it's felt a bit more

like a startup airline. American Airlines, Delta, and United, known as the Big Three, all have similar business models. So, competition comes from hub locations, product offerings, and route networks. United actually has the largest, most expansive route network abroad of any of the big three U.S. Airlines. So, in a way, United is America's flag carrier to the world. The airline has been spending billions on new airplanes, lounges, technology, and diversifying its cabins to offer a broader range of products to its customers. United's profitability and overall business performance have been steadily improving over the past five years. Delivery delays on new aircraft from Boeing and Airbus are hindering some airlines' growth plans. Both Delta and United have faced additional challenges this year. United had a string of maintenance issues, while Delta had to cancel more than 7,000 flights over the course of six days in July after the

CrowdStrike outage. That's more than all of Delta's cancellations in 2019. Despite these events, Delta and United stock are up this year, with United shares rising over 80% year to date. Since the recovery post-pandemic, they've had a better game plan than basically anyone else. It really hasn't changed. CNBC explores how United became one of the largest airlines in the world, and what's next for the carrier. United Airlines roots date back all the way to 1926. The original name of United was Boeing Air Transport, and it was owned by the Boeing Company until Boeing had to spin it off in the late 20s early 30s when it became United. It began by delivering mail and continued to grow as the dawn of the jet age took more people to the skies. United Airlines has a very, very strong and rich history, but the United Airlines we know today is

actually the product of various mergers. All the top airlines have grown through mergers. United's first big merger was in 1961, with Capital Airlines, expanding its reach to more of the East Coast. In 1985, they bought Pan Am's transpacific route network, which gave them an expansive route network into Asia. Another was announced in 2010, when it agreed to merge with Continental Airlines. Think of United as a Brady Bunch of airlines that now has a single name and a single paint job. The continental merger was really significant. What it did is it really set up the modern-day United Airlines. Over the course of a century, the airline has faced many challenges. On September 11th, 2001, two of the planes hijacked by terrorists were United planes. Then air travel demand plummeted. The United States was also in the middle of a

recession. So what we saw was several airlines. US Airways and United Airlines had filed for bankruptcy in the years following the terrorist attacks. It came out of bankruptcy in 2006 with a reduced staff and fleet. The Great Recession in 2008, coupled with rising fuel costs, hit the industry hard. Then there was a series of mega mergers: Delta and Northwest, American and US Airways, and United with Continental. The difficulties in that merger were many and varied. Trying to put two large corporations together is always difficult. You had two very different cultures. Oscar Munoz was on the board of United Continental Holdings in 2010, and later served as the CEO of United from 2015 to 2020. There was not a lot of love between the two organizations and groups. The company was not in a wonderful place with regards to unison, cohesion, singular point of attack.

operationally, financially, business-wise. So, it was a bit of a mish-mash. The $8.5 billion deal with Continental brought key hubs like Newark and Houston into the United network. With United's strong presence in Asia and Continental's in Europe and Latin America, it created the world's largest carrier at the time, or, as The New York Times described it, a behemoth of an airline. You had two of everything. So, how do you decide the systems and the people to run them when you have this quote-unquote merger of equals, where it's kind of top-weighted towards one side? Most of those systems, most of those leaders came over to run the much, much bigger organization. There was more than a few CEOs in a very short period of time, and it didn't help that my arrival came with a little bit of drama and crisis with my predecessor, with some issues that they got in from

a legal perspective. Munoz is referring to the ousting of CEO Jeffrey Smisek and what became known as 'The Chairman's Flight', after the airline reinstated a non-profitable route to accommodate the chairman of the New Jersey New York Port Authority. Over the next few years, the airline faced some of its biggest public relations disasters, which ranged from a man being dragged off a flight to a passenger's French bulldog dying in the overhead compartment. If you had a company that lagged and underperformed its potential overall. So they were like, if you looked at it from relative to the big four competitors, they were number four in overall margins and profit. What was important about the whole culture we built at United, honestly, if Covid had happened, like right when I had taken over right before I had taken over, I'm not sure United gets through it.

You know, we were by far last, made a ton of progress right before COVID. Our financial results were stellar, well ahead of schedule, and at the same time, we were beginning to slowly inch up. The COVID-19 pandemic brought air travel to a near halt, and United alone lost over $7 billion in 2020. United did a really smart thing during Covid. They didn't let go of any of their pilots, and that helped United recover faster than some of its peers did when travel rebounded as COVID ebbed. Airlines survived, in part because of a more than $50 billion taxpayer bailout. It was the biggest one in history for the industry, and it did help airlines stay afloat. And a condition of that aid was that they weren't allowed to furlough any of their employees. Airlines also have other revenue streams, like credit cards, which can bring in billions of dollars a year.

This is one of the only times in which a downturn happened, and there wasn't massive restructuring at that time, so the U.S. domestic market just didn't change. And so United, you know, kind of took advantage of that where they're like, well, we know that the international side of the equation will change. And it did. And so we're going to be ready for that recovery. And now you're starting to see structural change happen within the US airline industry. Whether it's being Spirit potentially, you know, going into bankruptcy or restructuring and others kind of changing their models. And so United wants to continue to deepen their moat while others continue to figure it out. One thing that did change during the pandemic was United got a new CEO, Scott. Kirby, came in as CEO, and that marked the beginning, I think, of United's strongest turnaround.

As the pandemic ended, air travel made a huge comeback with record-setting numbers. At the end of 2023, United surpassed American Airlines to become the second most profitable airline in the U.S. Delta remained at the top. When I think about the differences in Delta and United, it's just the overall route network. The route network is really what we are buying as passengers. United just announced new routes to places like Greenland and Mongolia in 2025. The airline said adding unique destinations is important to its customers and keeping them loyal to the airline. Picking new routes. It's part art, it's part science. If you just look purely at the numbers, you would never come up with a new destination because every airline is looking at all of the same data. Some routes, like Cape Town, have been successful, but others, like Bergen, Norway, were a flop and removed from

the schedule. When I think about just the competitive environment and how you kind of get there to be the largest airline and most profitable airline, is that you have to be really relevant to your customers in whatever markets you're flying, and you have to be able to compete very effectively. And sometimes that means being able to lose money in certain markets while making a lot of money in others. United does have the most international routes of any U.S. airline. We still have not achieved that domestically. We're still number 3 or 4, depending on how you measure it, but we think we have a lot of runway in front of us there as well. United is headquartered in Chicago, which goes back and forth with Denver to be the airline's busiest hub. Denver is the airline's fastest-growing hub and third-busiest airport in the U.S. Delta's Atlanta hub is ranked number one busiest,

and American Airlines. Dallas hub is the second. Denver airport has a lot of room to grow compared to some of the older, more constricted airports. When we're planning, we face a number of constraints; aircraft and slots are usually the two biggest. New York is the busiest airspace in the world, where United operates its Newark hub. One of the ways United plans to grow in Newark, with a lack of gates and airspace, is upgauging, swapping out smaller planes for bigger ones to fit more people. United very much wants to rule the world. Their order book suggests that. In 2021, the airline announced its largest-ever aircraft order, for 270 new planes, with plans to add more roomier seats and seatback entertainment. Once we received and had a stable set of earnings, we were finally allowed and possible to invest in the future into aircraft and products and innovations.

And that's really the biggest change. We've made a really strong decision to do is to retire regional jets and replace them with mainline jets. So domestically, I think it's adding larger airplanes between cities and growing the network that we have, but not really adding a lot of new cities, but actually growing the footprint. United Airlines is an airline that is trying to be a more premium airline right now, much as Delta has been for more than ten years. Delta is kind of the envy of the industry because it has had the widest profit margins for a long time. It has a very high spending clientele. It has a very lucrative credit card deal with American Express. And what United is doing now, it's going after the highest spending customers. A big source of growth in the airline industry recently has come from premium seating. Across the entire experience, we're really

focused on trying to embody premiumness. We across the board are looking for ways to give customers what they want. But not all customers want the same things. One of the challenges that large airlines like United have is trying to be all things to all people, all kinds of customers. They, of course, want that high value, high spending customer to buy seats in the front of the plane, but they're also going after customers that maybe want the simplest experience possible. And their main concern is getting the cheapest fare. The strategy to offer a wide range of seating options seems to be working. In the third quarter, United's premium revenue, including Business Class tickets, rose 5% and sales from its Basic Economy tickets were up 20% compared with last year. We've been able to offer more seats at more price points, and that has allowed us to compete with the low-cost carriers in a price-effective way for the Basic Economy.

traveler. But it also allows us to compete with the foreign flag carriers by offering a better product in the front of the cabin. That's also helped create a moat around United Airlines to drive sustainable earnings. In general across United, we sacrifice seats in the coach cabin to make sure that there's more Economy Plus seats in each Economy cabin for consumers to pick from. One thing that United does and has done for a long time, that Delta is actually copying now, is that they have a different tier of airport lounge, the Polaris Lounge, for United's top customers that are flying in the front of the plane internationally. And now what Delta is doing, partially because their lounges have become so popular, they're kind of segmenting the lounges and having a top-tier lounge, the Delta One Lounge, and that's really a page from United's playbook. Delta also just announced new interiors for much of

its fleet starting in 2025. Technology has also become a big choice to consider for fliers. United just announced it will offer free Wi-Fi using Elon Musk's Starlink system on hundreds of aircraft starting in 2025. Delta has offered free Wi-Fi to its SkyMiles members since last year. The airline industry is a long-cycle business. Decisions like buying new aircraft must be locked in years in advance. United has been making investments in sustainable aviation fuel, eVTOL, and supersonic air travel. It even opened a pilot training school to be better prepared for the growth in air travel and a wave of pilot retirements. They do face a very strong competitor in Delta. Delta is still regarded as the standard setter for excellence among the three largest US airlines. Where the gap is getting bigger is between United and American, which just seems to be falling further and

further behind. United just reported higher than expected earnings and forecast higher airfares going into 2025. Its stock hit a high it hasn't seen since February 2020. United's when you just look at their overall earnings profile like they tend to be very weighted to the second and third quarter. That is the industry in general, but Delta tends to do a much better job on the shoulder months. So if United can kind of figure out the off-peak or shoulder time frames a little bit better, you could potentially see them, you know, get in line to overcome Delta at some point. But the reality here is that like there can be two. You know, I. don't think all airlines are the same. I think every airline is different. And this wheel of investment and growth is what we're on. It's a really powerful wheel. And once you're on it, you want to stay on it and you

want to keep pushing forward. And I do think that 5 or 10 years from now, consumers will know without a doubt that United is distinctly different than most of the other competitors they can choose to fly.

How United Airlines Is Trying To Compete With Delta

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