I didn’t listen to United’s presentation at the JP Morgan Aviation and Transportation conference yesterday, but they’ve posted the presentation (.pdf) by CFO and Senior Vice President of Finance Gerry Laderman and Senior Vice President of Revenue Management Doug Leo. (HT: Demetrius)
Just as American will be introducing ‘Basic Economy’ fares – fares that exclude many of the benefits we’ve come to expect with a ticket, like an advance seat assignment — United will be as well.
It’s interesting to see the way they’re presenting their thinking.
They see (3) customer types and three benefit types, and it seems illogical to them that all three customers get the same ‘stuff’.
What they fail to recognize here is that there may be three types of fares in their conceptual model, but that doesn’t mean there are three types of customers.
Business travelers are leisure travelers. The person who buys a full fare ticket at the last minute for work also buys a weekend getaway with the family. They’re the same valuable customer. And you earn their loyalty based on how they’re treated every single time they walk into the airport and onto one of your planes. In fact, how you treat them when they’re with their family may be even more important. Abuse them during the week, but treat them right with a partner, with their kids, make their life easier and make them a hero and you’ve won them.
Going forward, if you buy the cheapest fares United wants you to have ‘segmented expectations’.
“Premier benefits” won’t apply to “entry level fares” although United hasn’t said which Premier benefits. One imagines they will follow Delta (and American) excluding complimentary upgrades or even perhaps all upgrades from their version of basic economy fares. We’ll have to wait and see which other Premier benefits may be excluded as well.
Bear in mind that for a US resident to earn elite status with United, they have to either spend a minimum of 12 cents per mile on their tickets — which means offsetting basic economy purchases with more expensive tickets, spending a minimum of $3000 for bottom-tier status and a minimum of $12,000 for 100,000 mile flyer status — or spending $25,000 on a United co-brand credit card (which doesn’t exempt members from the revenue requirement for 1K status). So these aren’t bottom-feeders who will be denied the benefits of their full year of travel loyalty.
This is all about the value of the individual trip, not the customer, which is anathema to the idea of a loyalty program.