United Airlines has rolled out its no-frills basic economy fare in all domestic markets in the continental USA, says president Scott Kirby.
The fares are available on all nonstop and connecting itineraries, except for some to Alaska and Hawaii, since their debut in February, he says at the Deutsche Bank Global Industrials and Materials conference today.
Just over 30% of economy passengers are booking basic economy, adds Kirby.
Basic economy fares lack many common amenities, including pre-assigned seats, frequent flier miles and the ability to bring bags onboard for the overhead bin.
The new fare class is part of an effort by United and other carriers to boost revenues. The Chicago-based airline forecasts $1 billion in incremental revenue from basic economy and other cabin segmentation initiatives by the end of the decade.
"I feel really confident we're going to make the $1 billion in segmentation," says Kirby.
American Airlines and Delta Air Lines also offer basic economy fares but have implemented them differently from United. For example, both can sell out of basic economy on any given flight leaving only regular or full fare economy tickets left, while United always has a basic economy option available to book along with higher fares.
"It gives customers choice," says Kirby, though he acknowledges that being the only carrier selling basic economy in this manner is a "disadvantage" to United.
Wall Street analysts, however, generally approve of United's basic economy sales strategy and have encouraged American and Delta to follow.
American is still early in its domestic roll out of the fare despite launching it the same day as United. Delta, who debuted basic economy in 2015, is slowly expanding the offering to international markets.
Basic economy is improving United's operations. By reducing the number of bags that must be checked at the gate, Kirby says the airline is operating more smoothly than it has in years.
United exceeded the industry average of 79.9% with 81% of flights arriving on time in the first quarter, the latest US Department of Transportation data shows. However, it was third to Delta and Hawaiian Airlines in the individual airline rankings.
Source: Cirium Dashboard
