Last night United Airlines President Scott Kirby gave an extended airline economics lecture to investors, explaining how they make more money by building up their hubs. As a result they’re projecting to grow capacity 4% – 6% in 2018 — and continue growing at a similar clip through 2020.
This morning we learned that Delta and American re-started their interline agreement allowing each airline to book seats on the other carrier in the event of irregular operations. It’s limited to this re-accommodation function, but that’s what customers primarily care about and it’s the key item Delta refused to allow in September 2015.
Here’s how that happened.
Until now Uber has insisted that your decision to tip – and how much – cannot affect the rating you’re given by drivers. Drivers have to rate you first before they know what tip decision you’ve made.
Tipping wasn’t even a part of Uber until recently. The idea was ‘the price is the price’ and indeed at the outset they contended that the tip was included. However in their quest to redeem their image, in part by accommodating drivers, Uber added tipping inside the app. At least Uber’s tipping has become cashless.
Two years ago Delta and American eliminated their interline agreement the most basic level of airline cooperation. That’s the agreement necessary to allow flights on the two airlines to exist on the same time, and that’s necessary for one airline to put its distressed passengers on the other carrier — without literally walking over with a credit card to buy a passenger a ticket.
As a general matter I think any airline whose operations are being run by Scott Kirby is going to get worse not better for customers in terms of passenger experience. At the same time there’s no one in the industry I’d rather listen to because he’s earnest and thoughtful and lays out more clearly than anyone else his belief about how his business, and the broader industry, works.
He walked through airline economics, United’s positioning, and marginal analysis with a primary goal of convincing investors it is okay for United to grow.
The point of ‘Basic Economy’ fares — which don’t let you assign seats in advance, upgrade, or make changes for a fee, and at United and American don’t allow you to bring a full-sized carry on onto the plane — is to make the travel experience so unpleasant you don’t want the fare, and will spend more to avoid the restrictions.
The risk is that customers don’t spend more with the airline offering the inferior Basic Economy product, but instead book a different airline instead (or even just decide not to travel). That’s what happened when United launched their basic economy product. They lost business. And they lost about a hundred million dollars.
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In the middle of last year American started flying its first plane with high speed satellite internet. I lucked into flying the aircraft at the beginning of November, and internet worked though I was surprised it wasn’t faster. I know what Gogo’s 2ku service can do unthrottled and I wasn’t getting anything like those speeds.
I flew American’s inaugural 737 MAX flight at the end of November and the ViaSat satellite internet didn’t work well.
American Airlines has been uniquely stingy making award space available on its own flights. I value American miles, but really just because I can book awards on partners like Cathay Pacific and Etihad.
Over the past few years there have been availability ‘dumps’. There will be a day or two or sometimes just a few hours where tons of international business class award space opens up on American flights. We haven’t seen that in many months, but are seeing it again right now.
Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel -- a topic he has covered since 2002.
Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »
