American Airlines Group (AAL) is the world's largest airline based on revenue, fleet size, and passenger miles. The company was formed as the result of a 2013 merger between AMR Corp., the parent of American Airlines, and U.S. Airways. It discontinued the U.S. Airways brand name in 2015. On a typical day, American Airlines services approximately 6,700 flights between 350 destinations.
American Airlines generates revenue by booking passengers on its flights but can only turn a profit by focusing on reducing costs per available seat miles. With an industry beholden to fuel costs and fierce, imperfect competition, many airline companies have, in the past, struggled financially and some—including American Airlines in 2011—have even declared bankruptcy. American Airlines Group has since emerged from bankruptcy and is again profitable, even in the face of stiff competition from four other domestic airlines.
1. Southwest Airlines Company
Southwest Airlines Company (LUV) comes in as the third-largest domestic carrier by total passengers and carries over 150 million passengers per year. The company has a business model that maintains low expenses through a great strategy of fuel hedging and by not offering travelers any amenities.
- American Airlines Group is the largest airline in terms of fleet size, revenue, and passenger miles.
- In the domestic market, American Airlines faces competition from Delta, United, as well as low-cost rivals JetBlue and Southwest.
- Delta is the second-largest airliner and, like American, has emerged from bankruptcy to become profitable again.
- Many airlines use a hub-and-spoke systems—with one central airport serving multiple destination cities—to help reduce operating costs.
Additionally, Southwest has employees that are trained to focus on high levels of customer service. Along with offering cheap fares, the goal is to build a loyal base of repeat customers. Through 2019, Southwest Airlines was able to remain profitable for 45 consecutive years, something no other airline can boast.
2. Delta Air Lines
Delta Air Lines (NASDAQ: DAL) is the second-largest passenger airline in the world by revenue, fleet size, and passengers flown, second only to American Airlines. However, the company faced fierce competition—causing financial difficulties due to price wars with discount airlines such as JetBlue and Southwest—and Delta entered bankruptcy in 2005. Since then, however, it has followed a revised operating strategy, shifting its focus toward the more profitable international routes, reducing expenses, cutting amenities offered, and charging checked-bag fees. This new business strategy has kept Delta Airlines competitive and profitable once again.
3. JetBlue Airways
JetBlue Airways (NASDAQ: JBLU) carries more than 30 million passengers per year, with 850 daily flights, and offers service to 86 cities in the U.S., Latin America, and the Caribbean. It ranks as the seventh-largest domestic airline and is a viable competitor to American Airlines in some markets. JetBlue offers cheaper fares, similar to Southwest Airlines model, and does this by minimizing operating costs.
4. United Airlines
United Airlines (NYSE: UAL) is a holding company with ownership of United Airlines and Continental Airlines. The 2010 merger between United and Continental allowed the combined entity to operate approximately 5,000 flights a day to more than 300 domestic and international destinations.
The company's hub-and-spoke system, which has one main airport as a central hub that serves the various other destination cities (the spokes), allows it to suppress operating costs by transporting passengers between a large number of destinations with substantially more frequent service than direct routes. Other airlines have adopted similar models and, in fact, most today have at least one central airport that their flights go through.