Delta, United, American, and Southwest: Profiting from Credit Cards Amidst Passenger Losses

Key Takeaways:

* The four largest US airlines collectively generated over $200 billion in revenue but lost money on passenger transportation.
* All carriers had higher costs per available seat mile (CASM) than passenger revenue per available seat mile (PRASM) in 2024.
* Despite these losses, the airlines achieved net profits largely due to lucrative credit card partnerships.

Financial Performance:

In 2024, the four major airlines (Delta, United, American, and Southwest) generated a combined revenue of $200 billion. However, all carriers faced a discrepancy between CASM and PRASM, indicating losses on passenger transportation.

Despite these challenges, the airlines reported net income near $8 billion and operating income of $14 billion. This profitability stems primarily from their co-branded credit card programs.

Credit Card Revenue Boom:

Delta, the most profitable US airline in 2024, earned significant revenue from its credit card partnership with American Express. Likewise, United's close partnership with Citi and American's exclusive credit card deal with Citi contributed to their overall profitability.

Pandemic Impact Reversal:

Before the pandemic, all four airlines experienced PRASM higher than CASM in 2019. However, pandemic-induced travel disruptions reversed this trend in 2020, leading to higher costs. Analysts anticipate this pattern to persist for Delta, American, and Southwest in the near future. United, however, projects higher PRASM than CASM this year and beyond.

Controlled Capacity Expansion:

United's focus on limiting capacity expansion aims to maintain PRASM strength. This strategy counters potential oversupply and downward pressure on ticket prices.

Conclusion:

Despite challenges in passenger transportation, the four major US airlines have sustained profitability through their highly profitable credit card partnerships. These partnerships generate substantial revenue, enabling the airlines to offset losses incurred on passenger operations.