United and Delta are now making billions catering to the highest fliers among us

By Claudia Assis

The two airline giants are reshaping the industry as they increase perks in a battle for customers willing to pay a premium

Delta's and United's success in catering to well-heeled customers comes as the U.S. economy is increasingly reliant on top earners and many struggle to plan their finances.

When it comes to travel experiences and financial performances among U.S. airlines, it's increasingly the case that there are United and Delta - and then there are the rest.

Executives at the two airlines made a bet that, after the postpandemic era of pent-up demand and "revenge travel," well-heeled Americans would no longer fly just to get to Point A from Point B. They're offering more nonstop and international destinations, with greater emphasis on on-time departures, lounges and tiered service to lure wealthier travelers. And the premium customer they're trying to attract is usually a stickier one, armed with co-branded credit cards and caught in a cycle of more consumption, more perks and more travel at their chosen airline.

'[I]t's a premium arms race.'Tom Fitzgerald, TD Cowen

So far, the approach is paying off for United Airlines Holdings Inc. (UAL) and Delta Air Lines Inc. (DAL), with Wall Street modeling revenue growth of 3% and 4%, respectively, in 2025 as compared with last year. Those two airlines' success in catering to wealthier customers comes as consumer spending and the U.S. economy are increasingly powered by the top 10% of earners, while the rest struggle to map out their finances amid high inflation and tariff effects.

Among U.S. airlines, "it's a premium arms race," said Tom Fitzgerald, an analyst with TD Cowen.

Other U.S. carriers, such as American Airlines Group Inc. (AAL) and Southwest Airlines Co. (LUV), are playing catch-up, even as there's some concern that a surprise economic slowdown next year could stop the Champagne flowing at Delta and United's party. Broadly, investors are optimistic about the U.S. airline sector, even including those companies that might be a little late to the premium-experience phenomenon.

American said last week it was seeing some pickup in its premium offerings, as part of an emphasis on luxury amenities to take advantage of a perceived consumer willingness to pay up for experiences. Under pressure from shareholders, Southwest, formerly known as a no-frills airline, backed off of its decades-old open-seating tradition to offer tiered seating starting in January.

Just a few years ago, Southwest's rivals flew only first-class, business-class and coach travelers; options now include a dozen characterizations, usually around legroom, entertainment options or boarding priority.

The path to premium

United's and Delta's roads to premiumization started with deals in the late aughts and early 2010s, when Delta merged with Northwestern Airlines and United with Continental Airlines, and they focused on on-time performances and white-glove service.

For the most part, however, the years between the "Great Recession" and 2020 saw a "total commoditization of air travel," Fitzgerald said. Cue the cattle jokes, as U.S. airlines focused on keeping costs low and counted on business travel, with its rarely discounted tickets bought by companies, as a money maker.

Executives at Delta and United broke free from the consensus thinking that business travelers were the only ones willing to spend. Since the coronavirus pandemic, many travelers have started placing more value on services and experiences - especially younger generations.

That dynamic is evident in the proliferation of lounges at U.S. airports and co-branded credit cards with U.S. airlines. Cards and loyalty programs that offer perks outside of travel points per dollar spent helped fuel the race toward premium.

United, for example, won't disclose loyalty-revenue figures but said recently that revenue grew 9% on a year-on-year basis in the third quarter. The company is investing more than $1 billion a year in what it calls "customer product enhancements" in all cabins and classes of service, it said.

Earlier this year, United Chief Executive Scott Kirby declared that the low-cost model for airlines was "dead." And Delta and United continue to invest in the premium model, by, among other things, substantially expanding the number of international destinations. Both airlines started offering daily nonstop flights to Sicily from New York City, for example.

The trend toward extravagance dovetailed nicely with the emergence of baby boomers and older Gen X-ers with more disposable income, the hankering for less-traveled international locales and a generational shift toward more creature comforts.

Some airlines are allocating a significant share of seats to their efforts to cater to travelers seeking luxury. United has the highest number of premium seats among the three biggest airlines - Delta, United and American - according to analysts at Deutsche Bank. That's despite having the lowest number of total seats among the three, which is why United's percentage of premium seats, at about 38%, is about 10 percentage points higher than the competitors, they said.

A year and a half ago, American had the highest number of premium seats but lost that lead as United grew its international network through premium-laden, widebody aircraft it wisely did not retire during the pandemic. Some 41% of United's international seats are now premium, which compares with 32% at Delta and 31% at American, Deutsche Bank said.

This focus on premium appears to have won over many of those following the stock. Three out of four analysts have buy ratings on Delta and United shares, according to FactSet, as compared with less than half of the analysts covering American and Southwest.

American poised to catch up

MarketWatch caught up with Stephen Trent, an independent airline analyst who spent decades at major investment banks, at the Newark, N.J., airport as he was about to hop on a United flight to Bogotá, Colombia, for a business meeting and then on to Lima, Peru, to visit friends.

For South American cities, Trent usually would fly American, but United offered a direct flight to Bogotá, he said.

American may soon become more competitive when it comes to premium offerings, Trent said. During the pandemic, when international travel was moribund, previous leadership pushed the airline to be more lower-cost focused and did not predict that the higher-end consumer would be driving travel right now.

'If you are American Airlines in 2026, there's a big opportunity to catch up.'Stephen Trent, independent analyst

"But they hit the undo button early last year, and now are heading in the same direction as Delta and United," he said. "If you are American Airlines in 2026, there's a big opportunity to catch up."

American carries more debt than Delta or United, but it also has the newest fleet among the three and is probably in the least rush to replace aging jets.

Trent said he would fly back to the U.S. on American.

Focus on wealthy travelers a boon for stocks

From an equity-market perspective, the three biggest U.S. airlines have compelling stories to tell, Trent said. He adds Alaska Air Group Inc. (ALK) to the mix, presuming Alaska can show investors that its merger with Hawaiian Airlines, completed a year ago, is bearing fruit.

Trent does have a favorite, however, and it's United, on a five-year time horizon. On a one-year basis, his call goes to American.

For now, it seems that the logic of focusing on the well-heeled is unassailable, even amid growing concerns about the economy with tariff pressures, the government shutdown and gridlock more generally in Washington, a cloudier economic horizon for next year, and expectations of interest-rate cuts. "Spending is holding up, but it's really the higher-end consumer, [while] the lower-end consumer is really under pressure," said Barbara Doran, founder and chief executive of BD8 Capital Partners.

The trends toward international travel, loyalty cards and control of major hubs make it harder for others to compete with Delta, American and United. "Those are structural issues for the little guys to overcome," she said. Smaller airlines really need a strong economy. If any major economic downturn were to hit, all airlines would be vulnerable, she said.

Ultimately, the airlines focusing on premium offerings have a major advantage in an environment where wealthy shoppers are fueling growth.

"Other premium businesses outside of airlines have beat consensus this quarter," said Melissa Otto, head of research at S&P Global's Visible Alpha, citing American Express's (AXP) recent strong quarter as well as the luxury-goods conglomerate LVMH Moet Hennessy Louis Vuitton (FR:MC) (LVMHF). "The premium trend may be gaining momentum."

The strength in the premium market seems to come from "a mix of a resilient job market and a vibrant stock market," Otto said.

"With employment staying strong, consumers feel more confident about their financial situations, which encourages them to make higher-end purchases," Otto said. "Plus, a booming stock market increases wealth for many, further fueling demand for premium products and services. This combination creates a setting where consumers are not just willing but excited to invest in premium experiences."

-Claudia Assis

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10-28-25 0832ET