In a move perhaps akin to selling upgrades from United Cargo to Economy, United is offering customers who buy basic economy tickets the ability to pay up after purchase to convert their ticket to regular economy.
Zach Griff writes that these offers are often more expensive than the difference between buying basic economy and regular economy in the first place. While even basic economy tickets remain changeable due to the pandemic it’s often better to call and use the credit from a basic economy fare to outright buy the regular economy one if you change your mind.
Nonetheless this points to some interesting elements of United strategy, and underscores who today’s travelers are.
- United’s basic economy restrictions are the most punitive of any airline offering the fare. Not only are the tickets unchangeable in normal times, but you can’t bring a full sized carry on onboard with you (unless you have elite status or the airline’s co-brand credit card). And if you don’t have a bag to pay to check they do not even allow you to check in online.
- This was new CEO Scott Kirby’s brainchild. When he arrived at United as President he delayed the launch of Basic Economy fares to make them more draconian.
- His Basic Economy work at American started out in similar fashion, but with Kirby no longer running things there American’s basic economy has become largely just no changes (outside of the pandemic) and no elite accrual.
- In contrast, Southwest Airlines has no Basic Economy, tickets have been changeable and they don’t charge for your first two checked bags. Delta, which started the Basic Economy craze, never stooped to blocking customers from bringing bags on board or blocking online check-in.
Basic economy is more than just a tool to get customers to spend an extra $20 – $60 each way. The primary value to airlines is segmenting business travelers from leisure travelers. They can offer cheap fares to compete with the lowest prices in the market without offering those fares to business travelers who would pay more (who often aren’t even shown basic economy options).
It’s the advent of basic economy that makes it possible for airlines to eliminate change fees on regular tickets, since change fees aren’t really needed anymore to distinguish leisure from business fares (along with of course the change fees weren’t going to return in a meaningful way for some time – too much uncertainty for passengers to be willing to buy tickets otherwise).
Right now though there just aren’t many business travelers. And even former business travelers are flying less for leisure. Many new lowest-fare flyers are in the skies. I’ve written that ‘all airline passengers are Spirit Airlines passengers now.’ So while they’re basic economy travelers, offering buy ups generates revenue without revenue leakage from business travelers buying down to basic.
In other words, it’s all about the (incremental) Benjamins.