American’s Destiny: Will the new American be the next Delta? Or the next United?

The $2.9b net profit Delta earned in the 12 months to March 2014 is extraordinary; It’s more than a billion dollars better than any other airline has ever earned in a year. Even controlling for airline size to compare smaller airlines that can’t possibly earn that much money, Delta’s 10% operating margin for the period put it among only about a dozen airlines in the world, big and small, with double-digit operating margins.

But could its reign as king among giant airlines end up being as brief as it is impressive? Don’t look now, but American—restructured, merged and under new management—is already not far behind Delta. During this year’s first quarter alone, its net result—both total dollars as well as margin—actually topped Delta, all before many merger synergies have taken hold. With so much upside left, is the question not whether, but when, American will overtake Delta?

Maybe. But first, recall something that’s now easy to forget: that the same was being said of none other than United, which now lags the industry, when it was at the same point in its post-merger history as American is today. United’s net profits topped Delta’s in both 2010, the year United and Continental merged, and 2011, United’s first full year as a merged company—all before any key systems or employee groups were integrated. The future looked as bright for United then as it does for American today.

So which path will American take? The answer depends partly on whether it has more in common with Delta or with United. As United can attest, this is too soon for American to know for sure. But the early signs—not just the headline financial numbers but some more specific attributes of this merger and this airline—do inspire hope.

Start with the fact that one benefit of merging last is that American can learn from its peers’ successes and failures. United’s messy systems integration wasn’t its only problem, but its earnings indeed began to slip at about the time in 2012 when it migrated the whole airline to the set of passenger service systems (including reservations) used by Continental, the smaller of the two airlines that were merging and the one whose executives were mostly in charge of the merged airline. Delta, on the other hand, had mostly adopted systems used by larger Delta rather than smaller Northwest, even in cases where employees internally grumbled that the Northwest systems were better. But Delta preferred to replace one third of its airport kiosks rather than two thirds, re-train one third of its workers rather than two thirds…

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