American Airlines is the second-largest airline in the world based on available seat miles and revenue seat miles. On a typical day, American Airlines services approximately 3,400 flights between 250 destinations. It is owned by AMR Corporation, a holding company that also owns American Eagle Airlines and Executive Airlines. American Airlines generates revenue by booking passengers on its flights but can only turn a profit by focusing on reducing its cost per available seat miles. With an industry beholden to fuel costs and fierce, imperfect competition, American Airlines' struggles to turn a profit are not uncommon in the industry. The following are the top four competitors to American Airlines.
1. Southwest Airlines Company
Southwest Airlines Company comes in as the largest domestic carrier by total passengers and carries over 100 million passengers in an average year. Southwest Airlines has a business model that maintains low operating expenses through a great strategy of fuel hedging and by not offering many amenities. Additionally, the company has employees who are focused on a high level of customer service. Coupled with low flight costs, this service has brought repeat customers. Southwest Airlines has been able to remain profitable for 37 consecutive years, something no other airline can boast.
2. Delta Air Lines, Inc.
Delta Air Lines, Inc. (NASDAQ: DE) is the second-largest passenger airline in the world by available seat miles, second only to American Airlines. However, the company has faced fierce competition, causing financial difficulties due to price wars with discount airlines such as JetBlue and Southwest. While the company still remains large and has scalability that can compete with American Airlines, its price wars have caused an inability to raise prices to natural supply and demand levels. This inability to raise prices resulted in Delta entering bankruptcy in 2005. Since then, it has followed a revised operating strategy, shifting its focus toward the more profitable international routings. This new business strategy has kept Delta Airlines competitive.
3. JetBlue Airways
JetBlue Airways Corp. (NASDAQ: JBLU) is the eighth-largest airline in the U.S. by revenue passenger miles. While the company has low fares similar to Southwest Airlines and Delta Airlines, it achieves those low fares in a unique way. JetBlue has low distribution and operating costs because the company has the youngest fleet of all domestic airlines. This allows for efficient flights that do not eat up fuel costs. It specializes in point-to-point flights that are cheap to operate and offers cheap fares. JetBlue services these flights to over 50 destinations in 20 states, Puerto Rico, Mexico and the Caribbean, making it a viable option to American Airlines.
4. United Continental Holdings
United Continental Holdings, Inc. (NYSE: UAL) is a holding company with ownership of United Airlines and Continental Airlines. The merger between the two airlines allows the combined entity to operate approximately 5,800 flights a day to more than 375 domestic and international destinations. The company's hub-and-spoke system allows it to suppress operating costs by transporting passengers between a large number of destinations with substantially more frequent service than direct routes. This ability to reduce operating costs through a hub-and-spoke system is also uncommon but makes it a competitor to American Airlines.