United Airlines has long been known for its focus on business travelers, the kind of customer who won’t blink at using the company charge card to book a four-figure seat in first class.
But amid heightened competition at a number of its hubs, United now wants to woo a different kind of passenger: the penny pincher who aggressively shops for the cheapest tickets.
The Chicago-based company plans to introduce a “no-frill fare” next year to better compete with so-called ultra-low-cost carriers, according to a Dec. 4 research note from Credit Suisse airline analyst Julie Yates.
The plan marks a new strategy for United and suggests the company is feeling pressure to keep cost-conscious passengers from booking with competitors including Spirit Airlines and Frontier Airlines.
Such airlines are known for low upfront ticket prices and for “unbundling” the cost of other services from the initial fare. They charge fliers separately, for example, for carry-on bags and snacks while packing more passengers on each plane.
United’s “ultimate goal would be to segment the cabin offering a no-frills, unbundled fare to capture leisure travel and bundled fare options for higher-yielding frequent travelers that desire a better experience,” Yates wrote.
“We are looking at how we can, over time, offer different sets of fares to different sets of customers,” said Rahsaan Johnson, a spokesman for United, a unit of United Continental Holdings.
He declined to discuss pricing for the no-frill fare category, including whether United would offer lower ticket prices and layer on services afterward. Johnson also played down the newness of the concept, pointing out that travelers flying to domestic destinations who aren’t members of the carrier’s MileagePlus Premier program already pay a checked-bag fee.
Yates wrote that in terms of fare pricing, United is feeling “concentrated areas of pain” in markets where it competes with low-cost carriers and American Airlines, which has been upfront about its determination to prevent the low-cost companies from grabbing a bigger piece of its market share.
Challenging markets for United include Chicago, where it’s the biggest carrier operating out of O’Hare International Airport. United and American dominate the hub, but Spirit has grown rapidly there. Last year, for example, Spirit served more than 1.1 million passengers from O’Hare, a tenfold increase over 2006.
Even as it plans to chase leisure travelers minding every cost, United is rolling out new ways to keep business travelers in the fold. The company is promising its big corporate clients that it will be as reliable as American and Delta Air Lines in 2016 or it will offer credits for upgrades and fees.
CRAIN’S Chicago Business
United Airlines To Offer Zero Frill Economy Seat Fare
