American Airlines, Delta Air Lines, and United Airlines are the three largest airlines in the US. And American and Delta are the two largest airlines globally. How have they risen to this position?
The story of their growth is fascinating. All three have origins in the early decades of flying, and all have played a part in the global expansion of aviation, airports, and aircraft development. There has also been plenty of consolidation alongside the competition, boosting their size and reach.
Along the way, there has been a raft of experimentation, alongside numerous other airlines that have failed. These three are, in many cases, built on the remains of the failed airlines. This article will explore this growth, the collaboration, and the mergers that have brought us to the three airlines as we know them today.
American Airlines – the growth of the world’s largest airline
American Airlines is an excellent place to start discussing how these three airlines each grew so large. It began as a collaboration between several independent airlines, became more formalized as it developed in the early days, and then continued its own expansion and acquisitions over many decades.
Starting with airline cooperation
Today’s airline has its origins in 1930. Many smaller airlines across the US came together to operate under a single brand, American Airways. As many as 80 airlines, including Southern Air Transport in Texas, Southern Air Fast Express on the West Coast, and Colonial Air Transport in New York, joined forces.
These mostly offered mail services. Passenger flights had begun in the US as early as 1914 (with the St. Petersburg-Tampa Airboat Line operating a service between St. Petersburg and Tampa across Tampa Bay in Florida) but were very limited.
The passenger airline started to take shape in 1934 when the businessman E.L. Cord bought American Airways and rebranded it as American Airlines. The airline started trading on the New York Stock Exchange in June 1939.
Cord hired Texan businessman C. R. Smith as the first CEO of the airline. He would go on to become one of the most well-known figures in US aviation history. One of his early achievements was the introduction of the DC-3 aircraft in 1936. Smith worked with Douglas to develop this larger version of the already operational DC2. This version allowed for better passenger sleeper (or seat) capacity and longer range.
The DC3 was used to operate the ‘Flagship’ New York to Los Angeles sleeper services. These remain today, although the 20-hour service with eight stops in 1939 has somewhat improved!
It was not just in aircraft that American was an early pioneer. The airline worked with the mayor of New York to build LaGuardia airport. And it opened the first airline lounge of any airline, the Admirals Club at LaGuardia.
Expanding from the 1940s
Like many airlines, expansion and operations slowed significantly during the Second World War. But soon after, American started expanding services, focusing on international as well as transcontinental flights.
American Airlines established a separate company, ‘American Overseas Airline,’ in 1945, which began operating overseas flights to Europe (but was sold to Pan American World Airways in 1950). Likewise, ‘American Airlines de Mexico’ began Mexico flights. And it introduced the DC-7 for nonstop transcontinental services in 1953 – a significant milestone.
American Airlines entered the jet age in 1959, introducing the Boeing 707. It had previously ordered the British de Havilland Comet, the first commercial jet aircraft launched, but canceled these orders after problems with fatigue and pressurization became apparent.
Acquisitions from the 1970s
The growth of the airline has not only been through the continued expansion of routes and services but also with several acquisitions. In 1971, it acquired Trans Caribbean Airways, adding several Caribbean routes to its network. And in 1990, it bought rival US airline Trans World Airlines’ (TWA) operations at London Heathrow.
TWA was a significant rival, having also expanded dramatically since its formation in 1930. It suffered after airline deregulation in the US in 1978, consolidating its operation at St Louis. It also started to move away from cargo and ignored the transpacific market.
These choices contributed to its financial difficulties by the end of the 1980s. Selling Heathrow operations to American raised finances, but the airline never recovered, and American took over TWA altogether in 2001.
It also took over part of rival Eastern Air Lines. Eastern was another major US airline that faced bankruptcy in 1991. American acquired many of its routes to Latin American and the Caribbean and introduced Miami as a hub airport. Delta and USAir (later to become US Airways) acquired many of its aircraft.
Merger with US Airways in 2013
The terrorist attacks in New York in 2001 (one involving an American Airlines plane) hit the US aviation market hard. American’s financial difficulties were made worse by the financial crisis of 2008, and the airline filed for bankruptcy protection in 2011.
As part of bankruptcy restructuring, American Airlines looked at mergers with several potential airlines. This led to the announcement of a merger with rival US Airways in February 2013.
US Airways was a major US airline. Before the merger, it was the fifth-largest in the US. Like American, it had grown steadily through expansion and acquisition since its foundings as All American Aviation in 1939. It later became All American Airways, then Allegheny Airlines, USAir, and finally US Airways. It merged with American West Airlines in 2005, retaining the US Airways brand.
AMR took 72% of the new company, and US Airways shareholders took 28%. The new company stuck with the American Airlines brand and logo, and American Airlines Group Inc began trading on the US stock exchange on December 9th. There were several challenges to the merger, mostly on the grounds of reducing competition and increased fares. American made some concessions to give up slots at key airports and to maintain service levels at others.
The merger created the largest airline globally at the time (by several metrics, including revenue and fleet size).
Delta Air Lines – the oldest US airline
Starting in crop dusting
All three airlines trace their origins back to the early days of aviation, but Delta Air Lines claims to be the oldest. It started life as Huff Daland Dusters Inc, an aerial crop dusting company founded in 1925 in Georgia. This produced and operated aircraft, nicknamed “Puffers,” to protect the cotton fields of the southern United States against the boll weevil insect.
The birth of Delta out of this was due primarily to Collett E Woolman. He was the chief entomologist, but also a keen businessman. Seeing the potential of the aviation aspect to expand (partly while working for the company in Peru), he led a team of investors to purchase the company.
Expanding passenger services from the 1930s
Delta Air Service was formed in December 1928. Passenger service began in 1929 between Dallas, Texas and Jackson, Mississippi (the airline name came from the Mississippi Delta area), and later to Atlanta and Forth Worth. It became Delta Air Corporation in 1930 but was already commonly known as Delta Air Lines (it was not formally changed to this until 1945).
This expansion continued in the Mississippi area until 1943, when it expanded to New Orleans and Chicago, and then to Miami in 1945. It made its first significant acquisition in 1953, taking over Chicago and Southern Airlines. This added the airline’s first international routes to Caracas and Havana.
Delta introduced the Douglas DC-8 in 1959 as it entered the jet age. It was the first airline to operate the DC-8, as it was the DC-9 and later the MD-11. It modernized quickly, operating an all-jet aircraft fleet by 1970.
Expansion and mergers in the 1970s and 1980s
The airline expanded with many new routes during the 1970s and 1980s. It merged with Northeast Airlines in 1972. Northeast was a major Boston-based airline, founded in 1931. It grew during the Second World War, with military contracts to carry troops, and expanded aggressively afterward to add many Canadian and Caribbean routes. By the end of the 1960s, it was in financial trouble, and after a failed merger with Northwest Airlines, it became part of Delta.
And in 1987, Western Airlines (a California-based airline with routes to the Caribbean and Alaska) was merged into Delta too.
The bankruptcy of Pan American World Airways (Pan Am)
Northeast Airlines made a big difference to Delta, but Pan Am was even more significant. Pan Am is one of the best-known airlines from the historic days of aviation. It was the largest international airline in the US, with an impressive list of achievements.
It was the first airline to start transatlantic services from the US (in 1937), the first to offer round the world flights, and the launch customer for both the Boeing 707 and the Boeing 747 (having worked closely with Boeing in the development of each).
Sadly, the airline’s glory days did not last, and it started to decline from the late 1970s. Rising fuel costs, combined with its international-only network, presented a significant challenge. The Lockerbie 747 disaster in 1988 led to lawsuits and fines. It ceased operations in December 1991.
Delta acquired most of Pan Am’s European routes shortly before its bankruptcy. This included New York to Europe, Miami, and Detroit to London as well as its hub operations at Frankfurt. United also acquired some routes, but Delta was the big winner. According to the Delta Museum, 23 new European and Asian destinations were added as part of this; before the acquisition, Delta only served 11 destinations. It also added 45 aircraft to its fleet.
Bankruptcy and merger with Northwest
Delta boomed in the years after the Pan Am route acquisitions. In 1997 (according to the Delta Museum), it became the first airline to carry 100 million passengers in a year. It also expanded its Pacific and Latin American routes during the 1990s.
Like all airlines, though, Delta suffered in the early 2000s. Despite extensive restructuring, it sought bankruptcy protection in 2005. It continued operations and underwent further restructuring and cuts. It rejected takeover bids from US Airways in 2006 and 2007 (itself later to merge with American Airlines).
The restructured Delta Air Lines emerged from bankruptcy protection in 2007, with a new stock market offering as well as logo and livery. It was not long before Delta and Northwest Airlines announced a merger in April 2008. The merged airline received its single operating license in December 2009, with the Delta Air Lines brand retained.
The merger made sense as the two airlines complemented each other. It also received less objection than many other mergers. Northwest Airlines was strongest in the Midwest US, where Delta was weaker. Delta was stronger in the transatlantic and Latin American markets.
Bringing the operations of the two airlines together took several years. It retained most aircraft but sold some regional jets to other airlines. It kept most of the hubs of both carriers but dropped Northwest’s Memphis hub along with Cincinnati, in order to streamline operations.
United Air Lines
Starting along with Boeing
United Airlines started around the same time as American and Delta but has a different origin. It was the only one of the three airlines to emerge as part of an aircraft manufacturer. And not just any aircraft manufacturer. It was formed as part of Boeing’s early expansion.
William Boeing founded the Boeing Company in 1916 as a manufacturer and supplier of aircraft to the military. After early success with the military, Boeing moved into airmail, and it set up a subsidiary, United Aircraft Corp, in 1928 to act as a mail-carrying airline.
This Boeing-backed company expanded rapidly, acquiring several other manufacturers and operators across the US, including Pratt & Whitney, Stout Air Services, and Varney Airlines (which introduced the Boeing 247 as a passenger aircraft). Soon after the acquisition of Varney Airlines, United Air Lines was set up as the parent company for the subsidiaries.
As aviation grew, laws and regulations shifted. The Air Mail Act of 1934 prevented manufacturers and airlines from being part of the same company. This led to Boeing splitting off its airline operations to a new company, United Airlines, with The Boeing Company continuing with just aircraft manufacturing.
William Patterson became the first president of the new airline (and was until 1963), and it began to expand services. Its early services, using the Boeing 247, grew alongside its mail routes, with hubs developed in Chicago and San Francisco.
Merging with Capital Airlines
United Airlines’ first merger came in 1961 when it joined with Washington-based Capital Airlines. This created the largest US airline, knocking American Airlines out of top place (Russia’s Aeroflot remained the largest globally).
Capital Airlines started in 1936 and, by the 1950s, had grown to be the fifth-largest in the US. It focussed on the US Southeast and Midwest.
The merger also brought some interesting fleet changes. Capital Airlines was the first operator of the British built Vickers Viscount aircraft. United took on this fleet of 41 Viscounts, the only turboprop it operated.
United also set itself apart aircraft wise as the airlines entered the jet age. It was the only US airline to introduce the French Sud Aviation Caravelle. It did not operate the 707 as both American and Delta did.
Overseas expansion
United was the last of three airlines to start overseas routes. Even after the expansion of permission in 1969 (before that, only Pan Am and Northwest had significant overseas routes), United was still not permitted any routes. It was not until 1983 that it started to operate routes to Tokyo.
Further expansion came with the downfall of Pan Am. While Delta was the big winner here, United also took plenty of routes. In 1985 is acquired Pan Am’s Pacific routes. In 1991, it took over the London Heathrow routes and managed to add Chicago of its own. And in 1992, it began service on many of the Latin American and Caribbean routes. United was now a significant player in overseas as well as domestic service.
Bankruptcy in 2002
United and US Airways began working closely in the 1990s, sharing marketing and frequent flier benefits. This led to an attempted acquisition by United in 2000, but this never happened (and would likely have been blocked on antitrust grounds in any case). If it had, the future landscape of the big three could have been very different!
Similar to American and Delta, United suffered in the slowdown after 9/11. This was compounded to a certain extent by the dot com bubble and decline. With its western hubs, United was more exposed to this. It filed for bankruptcy protection in 2002 but continued operations.
The restructuring saw a reduction in staff and fleet size, and the termination of several Latin American routes. Things got worse in 2003 with the SARS pandemic, with United again more exposed with a high proportion of Asian routes. It did not emerge from bankruptcy until 2006, the longest restructuring of any US airline.
Merger with Continental Airlines
United’s turn for a significant merger came in 2010. There had been discussions with Continental Airlines as early as 2006, but a merger was finally announced in May 2010. This made the new United the largest airline globally (at least until American’s merger a few years later).
The merger proceeded relatively smoothly, partly as the airlines agreed to lease key slots at Newark to Southwest Airlines. The new company retained the name, brand, and CEO, from United Airlines. And it launched a new historic livery combining the branding of both airlines.
The airlines in 2019/2020
The largest airline
Following their mergers in the 2000s, each of the new airlines that emerged became (for some time and by some metrics) the largest airline in the world. American Airlines, however, sealed the deal with its merger with US Airways. The combined airline became the largest in the US, and globally, by fleet size, passengers carried, and revenue.
This title, though, has shifted around between the three, both before and after consolidation in the 2000s. In fact, as of 2019, gaps had narrowed which metric you use. In 2019, the blog The Points Guy reported how Delta and United had moved ahead by some metrics.
In the second quarter of 2019, Delta had moved ahead in terms of total revenue. It reported revenue of $12.5 billion, compared with $12 billion for American and $11.4 billion for United.
And in terms of Available Seat Miles (ASMs), United led the way with a capacity of 73.2 billion ASMs. American retained second with 72.3 billion, and Delta 71.8 billion.
American, though, has maintained top place for fleet size and passengers carried.
Much of this switch has been due to operating challenges faced by American. It has suffered more than the other two airlines with the grounding of its 737 MAX. And there has been an ongoing move to introduce new revenue-earning methods and unbundled fares.
While all three airlines have introduced this, Delta was the first to fully introduce basic economy fare and expand revenue streams this way. Going forward, though, as all three airlines become established with new fare systems and the 737 MAX returns to service, the situation will likely even out.
Southwest Airlines has also risen to become a challenger to these top three. It, of course, lacks the global network and routes offered, but has grown rapidly to challenge domestically. By passengers carried, it has beaten United into third place (since 2015) but is significantly behind in reach and revenue (it still makes it into the top 10 airlines globally by revenue).
How have they coped in 2020?
For the most up to date position, Simple Flying took a detailed look at how the three airlines had fared in Q2 2020, with the significant slowdown in aviation globally. This, of course, may not be indicative of where they end up after the pandemic, but it is still an interesting comparison at an important time for aviation.
All three airlines faced a significant net loss. But United came out best with a $1.6 billion loss. Next was American, with a $2.1 billion net loss. The worst performance was Delta, with a loss of $5.7 billion (figures based on second-quarter results and respective earnings calls).
American fared best in terms of passenger revenue. It reported $1.1 billion from passenger bookings, while United saw $681 million and Delta $678 million.
American also was the most active, significantly ahead in Available Seat Miles (ASMs). But it didn’t necessarily convert this to revenue as well. For a final comparison, consider the vital Passenger Revenue per Available Seat Mile (PRASM) metric (compared against the year previously to show how much things have changed):
- United lead the way with PRASM of 7.6 cents per mile (14.32 in 2019)
- American was next with 6.48 cents per mile (15.22 in 2019)
- Delta achieved just 6.4 cents per mile (15.84 in 2019)
But United was ahead in cargo revenue, reporting $405 million against American’s $130 million and Delta’s $108 million.
Going forward, of course, it is hard to predict how things will turn out. The future demand, especially for international flights, remains highly uncertain. Having the top cargo revenue could undoubtedly be useful for United, as demand remains strong there.
But whatever happens, the big three airlines will likely remain the big three. 2020 has been challenging, but we have not yet heard any thoughts of airline bankruptcies or mergers. We even heard American CEO Doug Parker confirming this in May 2020, and explaining how it thought it unlikely for any of the major carriers.
There is a lot to discuss with the history and evolution of three of the biggest airlines in the world, and we can’t cover everything! Feel free to add any details or extras in the comments.
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