United Airlines is placing a new emphasis on basic economy fares.
In the third quarter, United reported that revenue from basic economy sales rose 50% year over year. Overall, 12% of United’s customers flew with a basic economy ticket.
“We’re going to lean into it,” chief commercial officer Andrew Nocella said during the carrier’s third-quarter earnings call Wednesday. “We have these big aircraft coming. And we’re going to be more competitive in the future, not less.”
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With larger aircraft, United has more merchandising flexibility. By 2027, United expects to average 145 seats per North American departure, up from 104 in 2019.
Opening up more seats for basic economy is also in keeping with carrier’s strategy to offer a wide slate of fares and products across its aircraft.
Last month, United pulled basic economy fares from legacy GDSs that use Edifact technology. Basic economy is bookable via United.com, the United app and NDC-enabled channels — including NDC offerings in the GDSs.
Increasing competition with budget airlines
Delta was the first of the U.S. hub airlines to introduce basic economy in 2012. United and American followed in 2017. The bare-bones fare enables them to compete more effectively with budget carriers Spirit, Frontier and Allegiant.
United’s basic economy fares don’t allow flight changes or carry-ons larger than a personal item. Flyers can’t choose their seat.
Speaking on the call Wednesday, United CEO Scott Kirby said the discount carriers should be worried.
“What we tried to do is create a cost-competitive product that is better so that they will choose to fly United,” he said.
He also took a dig at Frontier, which last year began cracking down on customers who attempt to board aircraft for free with carry-on bags that are too big to qualify as a personal item that fits under the seat in front of the passenger.
“Charging a customer $99 at the gate and paying your employees a commission to take their purses away crossed the line,” Kirby said.
Frontier says that the $10 commission it pays to gate agents to flag rule-breakers is designed “to ensure all customers are treated fairly, including the majority who comply with the rules.”
United’s Q3 profit was $1.14 billion
For the third quarter, United reported net income of $1.14 billion, up 20.7% year over year.
The carrier reported record third-quarter revenue of $14.85 billion, a 12.5% increase that beat analyst estimates by $70 million, according to investment website Seeking Alpha. Capacity was up 15.7%.
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