In most industries companies try to provide a continually better product at a lower price to beat the competition.
In the airline industry, protected from foreign competition and from upstart competitors by heavily regulation and congested government-run airports, most of the innovation that occurs is in aircraft technology available to any airline buying new planes.
As a result the dominant strategy from the largest US airlines is to provide a worse product at the same price, hoping customers will spend more to get what they’re already used to having. That’s called Basic Economy. These aren’t new lower fares than before. These are new restrictions on the existing lowest fares. For instance,
- No upgrades
- No free seat assignments, you get what’s left and don’t sit with friends and family
- No ticket changes
- Board last and you aren’t allowed to bring a rollaboard onto the plane, just a purse or laptop bag (‘personal item’) unless you use this trick
- No or reduced credit towards elite status
If you have an airline’s credit card one of the benefits is priority boarding. And they can’t take that away from you without running afoul of federal regulators. Since the carry on bag exclusion is enforced based on boarding group, credit card customers also get to bring a full-sized bag onto the plane.
And since credit card customers get priority boarding and a carry on bag on Basic Economy fares, so do frequent flyer elites. They give up other benefits, but can still board with a bag and board early enough to find overhead bin space.
Basic economy is essentially a fare increase, but one that’s imposed on people willing to spend more to avoid suffering. Others just get the suffering, and the lowest fares.
For elite frequent flyers, basic economy is a co-pay to use your benefits. Extra legroom seat assignments now cost $20 – $40 extra each way instead of being free.
United is warning their elite frequent flyers that they need to pay up, otherwise they’re going to experience a new unpleasant United.
Message: Customer who fly 100,000 miles a year and spend perhaps $30,000 aren’t worth giving an advance seat assignment to unless they cough up an extra $20 on their trip.
Tellingly in this long note it never even occurred to United to say thank you to their most loyal customers.
United says they’re losing business because of Basic Economy. American hasn’t rolled it out as broadly yet, so American is still offering a better product at the same price. Southwest, Alaska, and JetBlue will continue to do so. However, United is confident that since American will continue to go along and play the greater fool United will soon generate incremental revenue from the complex fare increase — because American too will no longer offer better value to consumers.
The truth is that elite frequent flyer benefits are probably worth $20 or more each way, and elites should probably pay up. However the dominant strategy is no longer loyalty. I will still hit Executive Platinum with American this year but they only have half my wallet share at best, down from over 90% two years ago.
For anyone else, the best strategy is to get the airline’s credit card. Buy basic economy, but board early with a rollaboard. Non-elites usually wind up in middle seats unless they pay more for seat assignments anyway and rolling the dice with what’s left over reports are that on United Basic Economy customers so far seem to be doing as well or better than non-Basic Economy non-elite passengers with seat assignments anyway.
Of course the key is to get the airline’s card and stick it in a drawer. United wants you to use the card to buy your United tickets in order to access the card’s benefits. But beyond that, don’t put any spending on the card since bank proprietary transferrable rewards cards (Chase Ultimate Rewards, American Express Membership Rewards) offer more value.
And when you get sick of airlines whose business strategy is trying to make more money by doing less for customers, advocate for more competition, allowing foreign ownership of US airlines.
“Non-elites usually wind up in middle seats unless they pay more for seat assignments anyway”
Super curious about why this is? This hasn’t been my experience with United at all, as a non-eliete. I fly united 5 or 6 times a year and never have a problem selecting a window seat at the time of booking, with no extra fee applied.
“These aren’t new lower fares than before. These are new restrictions on the existing lowest fares.”
This is not 100% true.
For instance, I frequently fly between ORD and FLL and United’s new Basic Economy fares on this route are dirt cheap and now compete with Sprit’s pricing. Example: $99 round trip for a United Basic Economy fare.
United never offered $99 round trip fares previously on this route. So although the benefits are stripped now, if you just need to get from point A to point B, United would win hands down every time now over Spirit.
As an AA Platinum Flyer I am hoping with their introduction of basic economy now on all routes that they start to match the United pricing on ORD-FLL.
United is saying to its elites they don’t care about you.
I suspect what is happening is some elites are booking basic economy fares. This means they probably won’t stay elite since they earn no PQM/PQD and they are then much more likely to book other airlines. So basic economy fares end up eroding their elite base.
I don’t understand why they don’t give PQM/PQD for basic economy, the customer is still being loyal and putting money in United coffers. Surely that would be in their own interest?
they don’t need to reward frequent flyers, because many frequent flyers become pretty acopic individuals who can’t handle a few hours without their creature comforts.
These sad individuals are prime targets for airlines like United because they know it takes a lot for people to switch their loyalty because these people can’t handle change.
frequent flyers are used to becoming excited about “free” things. They appreciate the thought of superiority, NOT quality.
people who appreciate quality, usually appreciate freedom of choice. That isn’t your average airline “elite”
The bottom line point is how transportation is no different than any other industry–lack of competition assures mediocrity at no risk.
Even in 1972, you had $16-$18 fares on all 727 jet PSA hourly flights between LA-SF. ORD-LAX was hyper-competitive between CO, AA, TW, and UA.
The “seat issue” will eventually bring the industry full circle, as how coach has devolved is border-line criminal to the physical health/well being of the customer. Their is no substitute for competition!
I hope United loses all their business from this. IAH has seen an across the board fare increase because there’s nobody to compete with out of IAH ever since they merged CO and UA. The UA experience is equivalent to flying on Spirit now, and I hope Spirit expands their presence at IAH because they only have 2 gates and UA is consistently at least 2x the cost of Spirit or Frontier. Personally I now fly on DL and AA despite having to make connections. If AA expands their basic Economy to IAH routes then I’ll just fly DL, they have the least bad Basic Economy.
As long as AA does play the Bigger Fool, UA will be OK with this garbage. I just wonder if anyone is connecting the dots regarding collusion or anti-competitive behavior here. There’s a common factor (called “Kirby”), who in his conference call as much as told AA to get with the BE program to the benefit of both airlines. I’m not a lawyer, but it looks shady at best.
The whole thing makes me curious …
Isn’t it all driven by consumers’ relentless urge to get a cheap (i.e.$$) deal …?
And then everybody complains that they get a cheal deal (i.e. bad seats etc.) ?
I don’t get it, really … without wanting to sound arrogant or elitist:
If organic meat is worth it to me, I pay more … if not, I don’t …
@Mark these fares aren’t cheaper. Southwest, JetBlue, and Alaska all offer competitive fares without these restrictions.
Has there been any discussion about allowing foreign airlines in the US? I am for it. This has gone beyond ridiculous.
This has got to be the dumbest viewpoint around. If the entire thing behind basic economy fares is no frills for a discounted fare, what point would there be to just give preferred members all the frills anyway? If they did that the might as well call it the preferred discount, not basic economy.
Be warned, you actually have to book and pay for your ticket with your United credit card, you can’t just have one. I tried to bring a bag on a flight from Salt Lake City as a United frequent flier and credit card holder and the ticket agent, Malisa, directly laughed in my face saying, “oh no we’re making a lot of money.”
I have since cut up my United credit card and they can go whistle for my custom.
@Vic Ward – that’s why I write, “the key is to get the airline’s card and stick it in a drawer. United wants you to use the card to buy your United tickets in order to access the card’s benefits. But beyond that, don’t put any spending on the card since bank proprietary transferrable rewards cards (Chase Ultimate Rewards, American Express Membership Rewards) offer more value.”
“Message: Customer who fly 100,000 miles a year and spend perhaps $30,000 aren’t worth giving an advance seat assignment to unless they cough up an extra $20 on their trip.”
Lots of the comments here seem to be equating revenue with profits.
The folks regularly willing and able to buy higher fare code buckets seem to be doing just fine and in fact appreciate the thinning out of the status ranks to actually make it worthwhile.
The one thing I do expect from the price increases is a better experience overall, and on this front the legacies have a long way to go until their corporate cultures really change.
No different than what DL has been doing to DM Million Milers. Elimination of first class upgrades. No automatic fake upgrades to EC. Sky miles per trip capped at 75k regardless of trip cost. The MQD requirement. Single Skyclub membership, almost impossible to use upgrade certificates. The highest Medallion level at Delta is the Cash Medallion level
I suppose “Elite” is another word for “Masochist”.
I haven’t flown United even once since they added revenue requirements to their Elite program. Probably could have made the targets, but it was the principle of the thing. Do they still have an airline?
Foreign Competition. YES!
What are you generally entitled to if you are Star Alliance Gold and fly on Basic Economy?
Gluttony will get you to look like King Henry V111 or so wrapped up in Narrsiacistic behavior you’ll forget all else going around you, but that’s about it. Try seeing America at road level vs nothing @ 30K feet. If you need to do the latter for your job, you’re to be pitied, not admired. Unless you’re into riding around in a cage built for pimates now I & then & being treated as such!
Last month I flew United for the first time in three years, just to burn up my last miles before cutting up the card. I think Delta should send United Airlines flowers every month for generating so much business for them.
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I am sat in J upgraded from R(Y) flying out of POS on AA reading the many interesting comments. I agree product quality has devalued, and the concept of airline customer loyalty has become out of focus in the context of the pax. We are seeing further product devaluation as C is removed and W becoming the middle class on many long haul with out the full benefits of J. I too should secure ExecPlat next year and achieve my million miles (leisure in under 10 years) then I will be retiring to grow pineapple and peppers Enough of the shinanaghins of airlines.
Had the BEST flying experience flying economy coach on Virgin Atlantic. Felt like VIP. Well taken care of . United take a page from their book. All employees meet with Mr Branson every two years. He values them. It shows in how they treat you.
Also southwest airlines was great. And o we the years Delta has served us well.
What’s your strategy for people not based in the US who cannot get the credit card?
I don’t draw the same conclusion from the email. I think it is just a reminder to Elites – please be sure you understand the restriction of the basic fares.
I recently spoke to an agent at the 1K desk, and indicated I would never buy a basic fare. She said you would be surprised, many 1Ks are buying them.
Lot’s of people don’t read all the Ts&Cs. And likely are just selecting the lowest fare and not realizing what a Basic fare is.