United’s CEO Says a Billion-Dollar Hub Is About to Fold

Scott Kirby has made a prediction that airline executives usually leave unsaid. The United chief executive says American Airlines will eventually give up its Chicago O’Hare hub, and that ‘economic gravity’ will make the decision for it. He puts American’s losses in Chicago at $1.1 billion over the twelve months leading into the first quarter, and argues the full-year figure will be worse because that number predates both American’s latest growth push in the market and the full run-up in fuel costs.

Kirby’s interest in this is not neutral. He wants United’s O’Hare operation to reach 1,000 daily departures — it is currently running around 600 — with enough connecting traffic to support fifteen additional long-haul international destinations. O’Hare’s gates and slots are heavily constrained and largely fixed, so there is no version of that expansion that does not involve American’s facilities becoming available. The forecast and the ambition are the same statement made twice.

American has rejected the premise outright, saying it has no plans to retreat from Chicago. The airline has in fact been adding flying at O’Hare rather than cutting it, which is either a defence of a strategically vital hub or exactly the behaviour Kirby is describing as economically unsustainable, depending on whose account you accept. Chicago is one of the few US markets where two network carriers maintain full competing hubs at the same airport, and that duplication has always made the economics harder for both.

Passengers should treat this as a forecast with an agenda rather than news of a decision. But the underlying question matters to anyone who flies through Chicago: if one of the two hubs did eventually consolidate, connecting options at O’Hare would shrink and the pricing pressure that two competing networks create would ease. Kirby argues consumers would benefit from a larger, more efficient United operation. The historical record on fares after a hub carrier withdraws from a market is, at best, mixed.

Sources: View from the Wing, One Mile at a Time