No carry-on bags allowed in overhead compartment under United Airlines' new 'basic economy' fares in 2017

Early next year United Airlines will try to woo a customer it's only gone after in fits and starts - the penny pincher.

Its "basic economy" fare strategy, which United has worked on for months and detailed on Tuesday, offers the cheapest seats on a plane in exchange for giving up the few perks that come with standard economy tickets.

The Chicago-based airline isn't alone in its quest to snare price price-conscious travellers who might otherwise fly low-cost carriers such as Spirit Airlines and Frontier Airlines. Delta Air Lines already offers its own basic economy fares in some markets and American Airlines has announced plans for a similar program.

United's basic economy fares are part of a group of initiatives expected to increase revenues and control costs to the tune of a combined $US4.8 billion ($A6.36 billion) by 2020.

United doesn't want no-frills fares to cheapen its brand, so basic and regular economy flyers will have a similar in-flight experience - no soft drink charges or smaller seats.

"It's going to be the same experience onboard as economy, which as we all know is better than our ultra-low cost carriers," Julia Haywood, United's executive vice president and chief commercial officer said, saying the new fares are about offering "greater choice."

But basic economy passengers without elite status won't get a full-sized carry-on bag, just a personal item to stow under a seat. Unlike a regular economy ticket, basic fares can't be changed or refunded and passengers can't select a seat in advance.

Basic economy flights also won't help passengers in United's frequent flier program reach elite status, though they will still earn miles redeemable for future travel. That's something penny-pinching customers who travel once a year might not miss, but could make loyal United fliers think twice before trading down to cheaper fares.

Advertisement

About half United's revenues come from the 85 per cent of passengers who flew once in the last year, many of whom are "shopping mostly on price," said United President Scott Kirby. The new basic economy fares will help United appeal to those passengers, he said.

Kirby declined to comment in detail on pricing plans but said basic economy fares likely will be similar to the lowest fares United currently offers, fares designed to compete with the lower-cost airlines.

Delta's basic economy fares are often just $US10 to $US20 less than typical main cabin tickets, said travel industry analyst Henry Harteveldt, founder of Atmosphere Research Group.

Some basic economy rules unique to United - including the ban on full-size carry-ons and lack of contribution to frequent flyers' elite status - are "smart disincentives" that will make the fares unattractive to passengers able to pay more, he said.

But United will need to be careful in how it prices the tickets so checked baggage fees don't eat up budget flyers' potential savings, Harteveldt said. He added that the airline also will have to be aggressive in notifying basic economy ticketholders about the carry-on bag rule before they get to the airport, to avoid angering passengers surprised by extra fees or delaying flights if agents have to check newly banned bags at the gate.

"My biggest concern in the potential impact on United's on-time performance when it rolls out," he said.

United said it expects using new fares and products to better target passengers across the travel spectrum will bring in an extra $US1 billion by 2020.

See also: Airline review: United Airlines Dreamliner, Melbourne to Los Angeles

The airline has offerings for travellers who value extra services and are willing to pay for them.

That includes Economy Plus seats that have more legroom, domestic first class and the Polaris international business class that will be introduced December 1. Earlier this year, United CEO Oscar Munoz said the airline plans to have more upgraded seats - increasing the number of Economy Plus seats by 20 per cent and business and first-class seats by 30 per cent - by 2018.

The airline also is considering a new premium economy class for both domestic and international markets, Haywood said Tuesday.

The first basic economy fares will go on sale early next year for flights departing in the early second quarter and will be available on domestic flights and some shorter routes between the US and Latin America.

TNS

See also: The best seats in economy class and how to get them

See also: Airbus plans to create the perfect economy class space

Comments