Dear readers,
Arguing that Chicago should be a one-airline hub market, Scott Kirby says United someday will operate at least 1,000 departures from O’Hare, making it a fortress hub, akin to what Dallas/Fort Worth is to American and Atlanta is to Delta. And, on Wednesday, he doubled down: he told the audience of Chicago-area business leaders at Crain’s Power Breakfast that even though two airlines laying claim to O’Hare keeps prices lower in some markets, they should want United to win.
Before I get to Kirby’s reasoning, let’s discuss his latest estimate of American’s O’Hare losses. Almost a year after telling me that American likely was losing $800 million per year on a run-rate basis (a number American disputed), Kirby has now upped his estimate.
“In the 12 months into Q1, American lost $1.1 billion in Chicago,” he said Wednesday. “That number is going to be bigger for the full year because that’s before their growth push started and before oil prices went up. You can’t do that in the long run, but you can do it in the short term.”
Kirby used to leave his argument there — perhaps he would say that American will fold in Chicago after its CEO (or perhaps its board) tires of the losses and gives up. But this week, Kirby had more to say to the business community about American’s demise: it will be a good for you.
Here’s his argument. American and United fly to too many of the same tiny markets, duplicating each other’s efforts in a way that does nothing for the local economy. Chicago is the nation’s third largest city, but other airports in smaller cities provide far more destination options for local businesses, because they have only one hub carrier, not two. For United to be more effective in Chicago and offer the same schedule breadth as, say, Delta in Atlanta, American needs to get out of the way.
“Chicago should be bigger, but United needs to be at 1,000 flights a day to make that happen,” he said.
It’s a sound argument, I think. In the short term, the FAA is holding United back after it installed movement caps at the airport. But that’s probably a short-term issue. The bigger impediment is American. As long as American maintains it sizable number of O’Hare gates, United will not be able to reach anything close to 1,000 departures.
It should not surprise you that American pushed back on Kirby’s comments.
“We’ve heard our competitor make a lot of predictions about our presence in Chicago,” the airline said. “But the reality is American is growing, investing, and competing for Chicago customers and will be for years and years to come. Our competitor’s vision for O’Hare appears to be one airline with less competition. That’s not going to happen.”
The statement makes no mention of how much money American is losing in Chicago. Perhaps it does not matter, assuming American wants to maintain its competitive position at any cost.
