Last week, you could even hear it during American’s conference call with investors and journalists. Executives made no mention of American’s longtime rival in Chicago, United. Nor did they talk much about low-cost carriers. Instead, they ripped Delta for losing billions of dollars from fuel hedging. They acknowledged Delta’s operational superiority but downplayed its extent. They noted how American’s pilots earn 7% more per hour than Delta’s pilots. They scoffed at Delta’s reliance on profit sharing to compensate workers. They alluded to Delta’s eventual need to spend heavily on fleet modernization, a process well underway at American. And they attributed Delta’s stronger underlying profits at the moment, excluding fuel hedges, to the simple fact that seven years have passed since the Delta-Northwest merger—it’s been just two since American merged with US Airways, implying lots of unharvested synergies yet to come.
American certainly isn’t alone in talking smack. If anything, it’s largely just responding to Delta, which is becoming the industry’s preeminent trash-talker. Delta mocks rivals for inferior service and reliability, never mind some of the things it says about aircraft manufacturers, governments, Gulf carriers, regional service providers and so on. Last fall, when Delta decided to cancel a standard interline ticketing and baggage agreement with American, it couldn’t resist telling the world why: because “American sent passengers to Delta for re-accommodation at a five-to-one ratio” during one recent month, Delta said. In other words, Delta was left carrying too many of American’s stranded passengers.
This escalating war, however, is about much more than just talk. It’s also about philosophy. Each carrier, for example, adopted diametrically opposed approaches to managing fuel risk. American abstained from hedging completely. Delta? Forget mere hedging. Sure, it did that. But it also bought itself an oil refinery! Their approach to fleet renewal is at least as contradictory. American’s pre-merger management team favored a big-bang strategy, placing massive orders for new planes with both Boeing and Airbus. Delta, on the contrary, has placed smaller but more frequent orders on an opportunistic basis. It also has a greater affinity for used airplanes and older models. Both carriers like joint ventures and alliances, but Delta buys ownership stakes in key partners. American doesn’t. When it comes to finance, Delta is eager to repay debt quickly to obtain an investment-grade credit rating. American doesn’t see the point, because it’s already borrowing at extremely low, investment grade-like interest rates. American supports handing U.S. air traffic control to…
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