Delta: America’s Luxury Airline and United’s Competitive Response

Delta: America’s Luxury Airline and United’s Competitive Response

A Delta Air Lines Boeing 767 lands at JFK Airport as Delta and United compete for luxury flyers

A Delta Air Lines Boeing 767 passenger plane from Dublin arrives at New York’s JFK International Airport, with the iconic Manhattan skyline in the background, on February 7, 2024.

Charly Triballeau | Afp | Getty Images

Delta Air Lines, the country’s most profitable airline, faces the challenge of maintaining its top position. The airline’s unit revenue, or the amount earned per seat flown one mile, surpassed that of its competitors last year. In 2024, Delta’s stock price has risen nearly 23%, outpacing other airlines in the volatile sector and outperforming the S&P 500. It forecast a potential 50% increase in free cash flow this year, reaching between 3 and 4 billion dollars. Delta also aims to regain an investment-grade credit rating. Notably, the airline achieved its highest on-time rate in the previous year, with more than 83 percent of its flights arriving on time, according to the Department of Transportation.

United Airlines, the second most profitable carrier after Delta, is making competitive moves. It says it could further boost its profits this year.

Delta CEO Ed Bastian acknowledged that there is a competitor out there looking to overtake them, saying, “Knowing that there is someone out there who thinks they can steal this baton from us keeps us on our toes and keeps us pushing,” in an interview with CNBC.

Delta has positioned itself as America’s premium airline, attracting numerous big-spending travelers, many of whom have American Express cards. The partnership with American Express generated nearly $7 billion for Delta over the past year. Sales growth of Delta’s roomiest and most expensive seats continues to outpace revenue from standard economy class seats.

In the rush for luxury passengers, both Delta and United have increased the number of high-end seats on their planes. These seats cater to travelers willing to pay an extra $300 for extra legroom on a cross-country round trip or ten times that for a business class seat.

Ed Bastian, a former auditor who took his first flight at age 25 on a business trip from New York to Chicago, is responsible for maintaining Delta’s brand reputation.

Delta will make another move to attract high-spending passengers on Wednesday when it opens its newest and most exclusive airport lounge at New York’s John F. Kennedy International Airport. The lounge will be available to passengers traveling in Delta One, the airline’s top-tier cabin that offers lie-flat beds on longer flights. At more than 39,000 square feet, it will be Delta’s largest lounge and will feature Missoni’s iconic chevron pattern on the pillows, as Missoni is Delta’s new amenity kit partner. The lounge will offer complimentary spa treatments, showers, a full restaurant and a terrace overlooking the airfield, betting on travelers’ enduring desire to indulge.

Delta is following in the footsteps of United and American, which have already dedicated their most luxurious lounges to customers flying in business class on long-haul flights. Delta plans to open Delta One lounges in Boston and Los Angeles later this year and is evaluating potential locations for additional lounges.

Savanthi Syth, an airline industry analyst at Raymond James, noted: “The problem with this industry is that no good idea goes uncopied.”

Meanwhile, United is placing substantial orders for new Boeing and Airbus planes and is refurbishing hundreds of narrow-body cabins with seat-back screens and Bluetooth technology. This strategy aims to cater to international business class travelers or those holding basic Economy tickets at the cheapest fare.

Andrew Nocella, United’s Chief Commercial Officer, expressed confidence in the airline’s path to profitability, saying, “We haven’t exactly reached profitability status No. 1 in the industry, but I know we’re on the right track. If we continue to invest in our customers through great service, great products and a great network, we know it will feed itself and help us achieve the financial results we are looking for.”

As we approach their 100th anniversary, Delta, United and American are working to stay ahead of changing travel needs and remain profitable.

United is expanding its presence to more than 300 airports. Determining the next popular destination is both an art and a science, according to Patrick Quayle, United’s head of network planning. With its vast global network, United is the largest U.S. airline by capacity and has recently launched service to destinations such as Dubrovnik, Croatia, and Amman, Jordan.

Quayle cited United’s successful addition of Cape Town, South Africa, announced before the pandemic, alluding to Delta’s hometown of Atlanta, saying, “Another airline has since copied us…”

These changes come at a difficult time for many U.S. airlines. Despite record numbers of travelers, labor and other costs have risen since the pandemic, impacting profit margins. Increased capacity in the U.S. market has led to fare discounts during off-season travel periods.

AdapA Delta Air Lines Boeing 767 passenger aircraft arriving from Dublin lands at New York’s JFK International Airport, with the stunning Manhattan skyline in the background, on February 7, 2024.

Charly Triballeau | Afp | Getty Images

Delta Air Lines, the country’s most profitable airline, faces the challenge of maintaining its top position. The airline’s unit revenue, which represents the amount generated per seat flown per mile, surpassed that of its competitors last year. In 2024, Delta’s stock price has risen nearly 23%, outpacing any competitor in the turbulent airline industry and outpacing the S&P 500. Free cash flow is expected to rise as much as 50% this year, reaching between $3 billion and $4 billion. Delta also aims to regain an investment-grade credit rating. Additionally, Delta achieved its highest on-time rate last year, with more than 83 percent of its flights arriving on time, according to the Department of Transportation.

United Airlines, the second most profitable airline after Delta, is circling the world. It says it could potentially make even higher profits this year.

Delta CEO Ed Bastian acknowledged the presence of a competitor aiming to take the lead, saying, “Knowing that there’s someone who thinks they can outdo us keeps us on our toes and pushes us to work harder,” in a interview with CNBC.

Delta has positioned itself as America’s leading airline, attracting large numbers of high-spending travelers, many of whom are American Express cardholders. The partnership with American Express generated nearly $7 billion for Delta last year. Sales growth of Delta’s roomiest and most expensive seats continues to outpace revenue from standard economy class seats.

In a race to attract luxury travelers, both Delta and United have increased the number of premium seats on their planes. These seats appeal to travelers willing to pay a premium of $300 for a few extra inches of legroom on a cross-country round-trip, or ten times that for a business-class seat.

Ed Bastian, a former auditor who took his first flight at age 25 on a business trip from New York to Chicago, is responsible for ensuring Delta lives up to its brand reputation.

Delta will make its next move in the competition for high-spending travelers on Wednesday by unveiling its newest and most exclusive airport lounge at New York’s John F. Kennedy International Airport. The lounge will be available to customers traveling in Delta One, the airline’s top-tier cabin that offers lie-flat beds on longer flights. At more than 39,000 square feet, it will be Delta’s largest lounge and will feature iconic chevron-patterned pillows from Italian fashion house Missoni, Delta’s new amenity kit partner. The lounge will offer complimentary spa treatments, including ice globes and jet-lagged eye serum, as well as showers, a full restaurant and a terrace overlooking the airfield. Delta is betting that travelers’ desire to pamper themselves will continue.

Delta is following the lead of United and American, which have already dedicated their most luxurious lounges to long-haul business class customers. Delta plans to open Delta One lounges in Boston and Los Angeles later this year and is exploring potential locations for additional lounges.

Savanthi Syth, an airline analyst at Raymond James, noted: “In this industry, no good idea goes unheard.”

Meanwhile, United is placing large orders for new Boeing and Airbus planes and is refurbishing hundreds of narrow-body cabins with seat-back screens and Bluetooth technology. This strategy aims to satisfy travelers in international business class or those with the cheapest tickets in basic economy.

Andrew Nocella, United’s chief commercial officer, expressed confidence in the airline’s progress toward profitability, saying, “We haven’t quite achieved industry-leading profitability status, but I know we’re on the right track. If we continue to invest in our customers through excellent service, great products and an expansive network, we believe that will contribute to our desired financial results.”

As they approach their 100th anniversaries, Delta, United and American are working hard to anticipate changing travel needs and maintain profitability.

United is expanding its presence to more than 300 airports. Determining the next popular destination is a combination of art and science, according to Patrick Quayle, United’s head of network planning. With its vast global network, United is the largest U.S. airline by capacity and has recently launched service to destinations such as Dubrovnik, Croatia, and Amman, Jordan.

Quayle cited the success of United’s addition of Cape Town, South Africa, announced before the pandemic, and nodded to Delta’s hometown of Atlanta, saying, “Another airline has since copied us…”

The changes come at a difficult time for many U.S. airlines. Despite record numbers of travelers, labor and other costs have risen since the pandemic, impacting profit margins. Increased capacity in the U.S. market has led to fare discounts during off-peak travel periods.

It is a complicated and expensive process.