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American and United up capacity after Memorial weekend success

written by Isabella Richards | June 3, 2021

United and American Airlines plan to increase their capacity to near pre-pandemic levels after the US saw a significant bounce back in passenger numbers over Memorial Day weekend.

American Airlines plans to increase its flight capacity by up to 93 per cent compared with pre-COVID numbers, while United will increase by up to 80 per cent.

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It comes as United recognised a net loss of $1.9 billion in the fourth quarter of 2020, and $7.1 billion for the full year. American Airlines was similar, with a first quarter net loss of $1.3 billion.

However, during the Memorial Day weekend, airlines saw 7.1 million travellers, according to the US Transportation Security Administration. In contrast, the same weekend in 2019 saw 9.7 million passengers pass through TSA checkpoints.

This has caused all airlines to upscale their capacity despite major profit losses last year, but American Airlines’ ambitious numbers are unlike most.

American occupies 19.3 per cent of the aviation industry market in the US, while United occupies 12.4 per cent. Between the two are Southwest airlines and Delta airlines. While these numbers aren’t vastly different, American Airlines is the number one in the US.

“Schedules reflect differences in geographical exposures and strengths in addition to varying levels of aggressiveness or conservatism by managements,” said Savanthi Syth, an analyst at Raymond James.

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“American has definitely been more aggressive on recovery expectations relative to Delta and United. However, they have also benefited from greater exposure to domestic [routes].”

Notably, this isn’t the first time American Airlines has been overly optimistic about travel forecasts. In mid-2020, it restored 55 per cent of domestic seat capacity in July, far more than United’s 30 per cent or Delta’s 21 per cent, according to Forbes.

Henry Harteveldt from Atmosphere Research Group said last year: “It’s a vacuum cleaner strategy. They just want to suck up whatever traffic is out there.”

However, American CEO Doug Parker believed its hubs are what drove its ambitious increases: “The big hubs win. We are absolutely benefitted by the fact that two of the three biggest hubs on earth are ours, which are Dallas/Fort Worth and Charlotte.”

An airline hub or hub airport is the name given to the airports that airlines use outside their headquarters.

American Airlines operated 77 per cent of its scheduled flights in 2020, compared with United at 80 per cent. However, both have flown 99 per cent of their 2021 scheduled flights, Financial Review noted.

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