The airline industry is highly competitive. As much as possible, the “big three” carriers try to build up fortress hubs, where they dominate market share, and have a lot of pricing power. However, there are some airports that act as hubs for more than one airline, where airlines still find it worthwhile to compete.
Perhaps there’s none more interesting than Chicago O’Hare (ORD), which is a hub for both American and United. The competitive dynamics here are fascinating, and I think this might be the most interesting market in the country to watch in 2026. In particular, comments from United CEO Scott Kirby are about as extreme as I’ve ever heard, and spell bad news for at least one airline (if not two).
Background on American & United competing in Chicago
As mentioned above, American and United both have hubs in Chicago. Going back a decade, the airlines were pretty even, but there’s no denying that United has massively taken the lead in recent times.
That largely comes down to United being really well run and focused, as Kirby is desperate to improve the company’s profitability. Meanwhile American has had a really rough several years, losing both business travelers and other premium travelers, due to a lack of a strategy.
What’s interesting about Chicago isn’t just the general shift toward United, but also the system in place that allows an airline to take the lead. Essentially, gates at O’Hare are allocated based on historical usage, with a bizarre system that also has a delay with awarding gates. So the idea is that a carrier’s service to the airport in the past determines the amount of flights it can operate there in the future.
In recent times, United has been allocated a lot of gates in Chicago, and has been growing market share. United executives claim that American is losing massive amounts of money at the airport (we’re talking many hundreds of millions of dollars per year). For what it’s worth, American executives have suggested that Kirby is exaggerating those numbers, and while they’re not claiming to make money in Chicago, they say they’re not losing that much.
Either way, Kirby has basically written off American in Chicago, suggesting the airline is toast. American now seems to be ready to fight again, and several weeks back, announced plans to add over 100 new daily flights from Chicago, so that it can once again get more gates.
So, how will this all end? You’d think the winners would be consumers, since there’s no doubt that this is going to lead to some fare wars. However, that’s not the narrative of United’s CEO, and I can’t help but find his commentary to be fascinating. Either United is about to pull off the most shocking airline defeat in history, or Kirby is going to have to eat his words.
United has massively pulled ahead in Chicago
United “drawing a line in the sand” with American in Chicago
During yesterday’s 2025 earnings call, United CEO Scott Kirby was asked by Deutsche Bank’s Michael Linenberg about the competitive dynamics in Chicago. He pointed out how American is adding a lot of flights in Chicago, and quoted Kirby’s claims that American is losing $700-800 million per year at the airport.
So he asked if the increased competition is going to be a drag on United’s domestic yields, or how he sees that playing out. I just have to share Kirby’s response in full, because yowzers:
I was afraid we were going to get through the call without addressing Chicago. So I’m happy to do it. And it’s probably a good follow-up to the last question that I talked about. And I wanted to start with, at United Airlines, we’ve been a decade-long strategy to build a brand-loyal customer airline. That was all designed to get us out of the commoditized part of the industry where all that mattered was the schedule. And that meant in both — focusing on the product, the technology and service to get customers to choose us.
That’s been a really successful strategy. It didn’t happen overnight. It really has been a decade in the making, but you can see the results, and we’ve had market share increases everywhere that we fly. In Chicago, to be specific, in 2016, American actually had higher local market share with Chicago-based customers and higher share with business customers. In 2025, even after all the growth from our competitor, United now has a 22-point lead with Chicago-based customers in Chicago and a 38-point lead with the brand-loyal business customers.
Being a brand-loyal airline just really inoculates us mostly from that competitive activity. And in fact, in 2025, even with all that growth, the Chicago RASM outperformed the rest of the system by 1%, and we made a $500 million profit. By the way, I think we probably would have made $600 million. So it probably cost us about $100 million. But our competitor lost $500 million even though they didn’t start that really until May, so bigger on a full year basis.
As we enter 2026, there’s another wave of growth coming from that competitor. Mostly that’s going to wind up exactly the same as it did last year, with one difference. In 2025, American added gates. That means we watched it. We could have responded. We chose not to. They’re going to win 3 gates back at our expense when the analysis comes out later this year. We knew that was going to happen. We figured we’d just let it settle into a new normal and that would all be fine.
But in 2026, we’re drawing a line in the sand. We are not going to allow them to win a single gate at our expense in 2026. We’re not trying to win gates, but we’re going to add as many flights as are required to make sure that we keep our gate count the same in Chicago. Look, we’re just going to stay focused. We’ve had the right strategy at the whole network for a decade. We’re going to keep doing it. It’s a winning strategy. It’s working. We’re going to keep doing that in Chicago.
For what it’s worth, I think that we will likely grow our earnings. Certainly, we’ll make at least the same $500 million, I believe. And likely, we’ll still be able to grow our earnings in Chicago for the same reasons it worked last year. American, and we’re pretty good at estimating this is likely to push to about $1 billion in losses in Chicago. But we’re going to just stay focused on the strategy that’s worked for the last decade. Our team is doing a great job taking care of customers and it’s working for us.
Kirby thinks American is totally cooked in Chicago
Will this really go so well for United and so poorly for American?
Kirby has no doubt done an amazing job moving United in the right direction, and he has also done a good job being a relatively reliable narrator on United’s performance. Part of the reason United’s stock does so well is because United actually delivers on the expectations it sets.
This situation in Chicago is perhaps the biggest uphill battle that United could face, as I see it. American will start capacity dumping in Chicago, with the goal of being allocated more gates there, as part of a bigger long term strategy. Meanwhile United is saying it refuses to give up any market share, so the airline will add as much capacity as it needs to, in order to stop American.
Strategically, airlines do this all the time. They don’t mind losing money in the short term, in the hope of making money in the long run. What’s unique here is that United is claiming it will do this while having the hub be at least as profitable, if not more profitable, than it currently is?
So United claims it will make at least $500 million in Chicago as it grows, while Kirby claims that American will likely lose $1 billion as it grows, basically doubling losses? We all know that United does better than American financially, but is that really how things are going to play out?
Kirby always talks about United getting out of the “commoditized” part of the industry, and increasingly having “brand loyal” customers. This hasn’t actually directly been put to the test in that many markets, given the carrier’s focus on building up fortress hubs. So this Chicago situation should prove as the greatest test of this to date.
Will customers choose United over American due to brand loyalty, even if American has lower fares? There’s simply no other way you end up in a situation where two carriers would have such inverse financial performances.
We’ll see. If Kirby is right, then this will be yet another massive strategic misstep for American, and will harm the carrier’s profitability even more. We know that Kirby thinks that American is cooked. But if Kirby is wrong — and it doesn’t take a lot for Kirby to be wrong here, given his outrageously rosy perspective on capacity dumping — then this might prove that American isn’t quite as screwed as Kirby has tried to suggest. Only time will tell how this plays out…
In theory, consumers should benefit from far wares
Bottom line
American and United have been competing in Chicago for many years, but competition is about to heat up more than ever before. Over the past decade, United has continued to gain market share at the airport, at American’s expense. American now wants to reverse that, and is adding over 100 daily flights.
Given the system for awarding gates at the airport, United claims it’s “drawing a line in the sand,” and won’t give up any more market share to American. This obviously means we’re going to see a huge amount of capacity dumping.
What’s surprising here is that United CEO Scott Kirby claims that as this happens, the carrier’s profitability in Chicago won’t decrease, and might even increase. Meanwhile he claims that American’s losses at the airport will double.
I don’t know how this is going to play out. If Kirby is right, then United is simply unstoppable. If Kirby is wrong, well… he might have to eat some humble pie.
How do you think this Chicago O’Hare situation will play out?
