United Airlines is changing the way it sells Basic Economy fares. President Scott Kirby was adamant just one month ago that the basic economy fares would always be on offer, down to the last seat on the plane. That appears to no longer the case in many markets.
$UAL will always offer a basic Y fare, even if there's just one seat left on a plane, says Kirby.
"It gives customers choice."
— Edward Russell (@ByERussell) June 7, 2017
At that time Kirby acknowledged that other airlines were behaving differently on the matter, placing United at a “disadvantage.” But investors seemed to like the plan so he stood strong. In the past week or so, however, a number of markets have seen the BE market nearly disappear for one-way trips. Where multiple fare classes previously offered one-way basic fares now far fewer do.
The change has also necessitated filing more fares with a round-trip calculation rather than one-way as the traveler choosing a return trip is still liable to run in to the Basic Economy fares. In the Newark-Los Angeles market, for example, United essentially did not sell round-trip fares since the introduction of Basic Economy. That is now changed, with round-trip pricing filed for multiple fare buckets from W (mid-level) up through Y. In the examples I’m seeing, however, the round-trip BE fare is simply double the one-way non-BE fare. In that scenario the BE fare is not offered to passengers even though it exists.
The changes are very much route-specific so far. Last week I purchased San Francisco – San Diego on Southwest, both because of the flight times and because the UA option matching the price was a Basic Economy offer. This week the W fare is no longer Basic Economy but did not increase from last week’s filing. Not only are Basic Economy fares being pulled in some markets but the associated price hike is being rolled back, at least in higher fare buckets.
Looking at other markets, however, suggests that the reprieve from Basic Economy is not yet ready to go network-wide. Flights between LaGuardia and O’Hare still have BE fares published up to the higher levels, for example. Perhaps that is because Spirit competes on that route and United is choosing to honor the originally announced intent of the BE fares: competing with the ULCCs, something it never really did with the initial implementation. Or maybe it just hasn’t made it around to “fixing” those fares.
Kirby was optimistic about hitting the target of $1 billion additional revenue as a result of the fare segmentation by the end of the decade. It is unclear how this shift in sales tactics will affect that plan.
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- United Basic Economy fares are alive, spreading
- The Basics of United’s new Basic Economy fares
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GREAT… Cause it BLOWS!!!!
look at all those tiny 10-abreast seats; won’t fly it long haul, or a 9-abreast 787, ridiculous
Nice job, Seth. This is classic Kirby: not afraid to try something, and not afraid to roll it back the minute he realizes he pushed too far (rather than sticking with it just because it was his idea).
That sort of decision whiplash has to make being a middle manager under him challenging. Full-throated support one week and a wholesale change the next isn’t easy to manage for most folks. And airlines (and their employees) are not especially known for shifting gears quickly.
Absolutely. That is the flip side. Just generally, I like when someone doesn’t defend a position they have taken just because it was their position. There have just been so many initiatives over the years where it was so clear early on how the movie was going to end, but the people whose idea it was kept trying to convince everyone (including themselves) – and that is equally frustrating for the middle managers who know the truth. One example among many: all the “LCCs”-within-an-airline in North America, which all failed (MetroJet/Delta Express/Shuttle by United/Song/Ted/Tango). It was equally demoralizing for the middle managers, who knew the numbers, to listen to executives talk for years about how those units were “exceeding expectations” (always code for: doing horribly) until five minutes before they were shuttered. So although neither extreme is optimal, I’d rather err on the side of management that cuts their losses.
You forgot the best named LCC within an airline, and one of the first – Continental Lite.
Was it an airline? Or a fad diet in a grocery store magazine? ?
An unforgivable oversight on my part! GSO was challenging ATL for global hub dominance. I guess part of me still doesn’t believe that thing was real.
The goal as expressed by Scott Kirby is to make an extra $1B in revenue. I guess they discovered that trying to extract an extra $15 on $1000 coach tickets wasn’t working….
If “It gives customers choice.”, then why does other airlines behaving differently placing United at a “disadvantage”?
It’s an interesting about face, correct IMO, but as Seth notes, notable for the admission of error.
Interesting to see whether the entire $1b estimate of incremental revenue was in fact based on practically every fare being “bought up” as opposed to only 70% of discount Y.
When he projects $1 billion in revenue from people buying into the fare increase to avoid this horrible product he should also consider lost revenue from people choosing not to buy at all, such as Seth’s WN example in the post. I do have choices, Mr. Kirby – WN, AS, DL and AA for four.
Maybe it was also causing airport issues? A friend just flew BE and they couldn’t checkin online. It was required that they go to the airport checkin desk to prove that they didn’t have more than the allowed size for a carry on bag.
I don’t think the operational side was the problem. I think that customers were booking away from UA in competitive markets where OALs were offering non-BE fares at similar prices.
^^^ That. I’m definitely guilty.
Also heard a good argument where it was hurting corporate sales where travel policies did not allow purchase of fares over “basic”. So business travelers were taking alternative carriers just for the perks of standard fares.
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