Operational excellence becomes a competitive force for American Airlines, Delta and United


Now that the largest wave of consolidation is over in the US market place, it is arguable that operational performance plays an even greater role in the country's competitive landscape. The US' three large global network airlines, American, Delta and United, through their own network strength and partnerships, have the ability to offer passengers almost blanket coverage of the globe.

Yet, as the network distinctions among those airlines become increasingly blurred, airlines need to find other ways to distinguish themselves. So operational performance becomes an increasingly competitive facet of the business.

Among the three large airlines, Delta enjoys an outperformance of its rivals in mainline operations. Its on-time performance and lower percentage of flights cancelled throughout 2015 outshine both American and United.

American has just completed its reservations systems cutover, and now has time to focus on maximising the merged (AA/US) entity's operational performance. United is working towards shoring up its operational performance, having made progress during 2015 to decrease flight cancellations and to improve its ontime rates.

There is no doubt that Delta has set the competitive bar for its large US peers, and other airlines. The question is how long Delta's reign of operational supremacy will last.

Delta outshines its large network rivals in ontime flights and cancellations

Data from the US DoT show Delta's percentage of domestic mainline flights arriving on time for the 12M ending Aug-2015 was 85.2%, compared with 77.7% for American, and 76% for United. Delta's ranking in that metric among the major US airlines was third, American's was seventh and United's was 10th. Delta's and American's rankings were the same year-on-year for that period, but United's fell from sixth to 10th.

Delta also betters the large global network airlines in the percentage of its mainline flights cancelled. The airline cancelled 0.62% of its flights from Jan-2015 to Aug-2015, whereas United's percentage of cancelled flights was 1.55%, and American's was 1.89%.

Mainline flight cancellation performance for Delta, American, US Airways and United: Jan-2015 to Aug-2014

Airline Total Flights Number of
cancelled flights
Percentage of flights
Delta 585,399 3,602 0.62%
American 424,882 8,011 1.89%
US Airways 198,715 4,067 2.05%
United 341,961 5,295 1.55%

One of the reasons that Delta is outperforming its peers is that it has the time and resources to dedicate to maintaining its operational edge.

American completed its reservation system cutover, a complex and time consuming process, in Oct-2015. With that major project complete, it can now turn its attention to improving operations. Recently American offered a snapshot of just how smooth the cutover was, measured by operational disruptions. In the first five days after the system completion, American's ontime performance was 89.4% and its completion factor was 99.95%. Moreover, the airline touted that its ontime arrival rate in Sep-2015 and Oct-2015 was the best since 2000.

United and Delta have also posted favourable mainline completion factors in 2015. Delta has not dipped below 98%, and it achieved a 100% completion factor in Sep-2015. Between Jan-2015 and Sep-2015 United's completion factor did not fall below 97%.

Delta and United mainline completion factors: Jan-2015 to Sep-2015

Month Delta's mainline
completion factor
United's mainline
completion factor
January 98.9% 97.5%
February 97.5% 97.4%
March 99.3% 98.4%
April 99.8% 99%
May 99.8% 99.1%
June 99.8% 97.8%
July 99.9% 99%
August 99.8% 99%
September 100% 99.6%

During the Jul-2015 summer high season, American recorded an 80% ontime rate and 99% completion factor. The airline re-banked its largest hub in Dallas/Fort Worth in 2015, and company executives recently stated that since the project was completed, it had posted a nine point improvement in ontime departures, and is recording a 99.9% completion factor at the hub.

American is investing in areas to sustain and improve its operational performance, particularly in irregular operations and maintenance. The USD100 million investment should be completed by mid-2016.

United cites progress in its operational performance, as investments come to fruition

United's operational credibility took a big hit after service 'meltdowns' in the summer of 2012, stemming from the merger integration with Continental that sent some high-yielding customers to other airlines. In Jul-2012 its ontime performance sank to 64%, a 10.2ppt drop year-on-year. During 1Q2015, United management explained that its Express regional operation had been an area of focus for improvement. Its Express completion factor during the quarter increased roughly 5ppt, and mainline ontime performance grew 1.5pp year-on-year.

United has also made necessary investments to improve its operational performance, particularly recovering from irregular operations:

  • In Jan-2015 after a significant snow storm, and using new software the airline quickly redeployed flight crews.
  • In Jun-2015 United's performance fell below expectations, due to adverse weather and maintenance write-ups. DoT data show that the percentage of United's cancelled flights in Jun-2015 was 2.40% compared with 1.19% for Mar-2015. During Jun-2015 United estimates that it faced thunderstorm activity at one or more of its hubs 25 days out of the month.

Although United's Jun-2015 operational performance was below expectations, during 1H2015 the airline cancelled 24,000 fewer flights year-on-year, and improved system-wide performance by 4ppt.

At the end of 3Q2015, United estimated its year-to-date ontime consolidated performance was five points better than the year prior. For the 9M ending Sep-2015, United estimates it cancelled 30,000 fewer flights year-on-year.

Delta aims to widen its competitive advantage in operational performance

In 1Q2015 Delta posted a 98.6% mainline completion factor, and recorded 25 days with no mainline flight cancellations. The company's completion factor in Jun-2015 was 99.8%. Delta's ontime performance in 2Q2015 was 85.3%.

In 3Q2015, Delta's mainline ontime performance was better, at 86.1%, with a completion factor of 99.9%. It posted 40 days with zero mainline cancellations in the quarter.

"In the month of September alone, we cancelled only 13 flights out of more than 83,000 flights, performance our competitors will not match", said Delta CEO Richard Anderson.

Delta estimates that in 2014 it posted 197 days with perfect completion. Similar to the first nine months of 2015, Delta's mainline cancellation performance during 2014 was superior to its rivals for the year. Its cancellation rate was 0.81%, compared with 1.57% at American, 1.62% for US Airways, and 1.49% for United.

Mainline flight cancellation performance for Delta, American, US Airways and United: 2014

Airline Total flights Number of flights
Percentage of flights
Delta 800,375 6,502 0.81%
American 537,697 8,347 1.5%
US Airways 414,665 6,737 1.62%
United 493,528 7,330 1.49%

Delta's favourable operational performance also drives positive trends in other key metrics, says Mr Anderson. "When you run a really good operation, your unit costs are lower," he concluded. Delta's unit costs (excluding fuel) for the 9M ending Sep-2015 were flat.

The airline also cites investment it has made in better planning tools, core reliability and processes to drive its operational excellence. "It's a very long list of actions that we've taken over time and investments that we've taken over time", said Mr Anderson.

Regional partners are the wildcard as the big three try to sustain operational improvement

Delta's mainline operational performance has definitely garnered much attention during the last couple of years, but just as it works to widen that competitive operational gap, its rivals American and United are determined to close in on Delta's edge.

The continued focus on operational excellence should benefit consumers, as the three large airlines work to sustain and enlarge their customer loyalty base.

One wildcard for all three airlines is the operational performance of their regional partners and the effect that dwindling pilot availability is having on the US regional airline industry.

With regional flights representing a significant portion of system operations for Delta, American and United, their work to sustain high levels of operational excellence is far from complete.

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