United Airlines says its strategy of catering to elite customers while charging lower-end customers for extras is working. One example: United expects upgrades to “Economy Plus” seating will bring in $50 million this year.
That’s what United chief financial officer Jake Brace told an airline-conference audience Wed nes day.
When coach customers check in, they can pay a fee ranging from $24 to $99 to upgrade to an Economy Plus seat with 5 inches more legroom, if one is available. They can also pay $299 for a year-long Economy Plus Access membership.
For United, it’s one way to sell lower fares in a competitive industry, bring in extra revenue and give certain creature comforts to those willing to pay extra.
While other airlines have chosen to keep things simple, United’s strategy is to segment its services into different products. Ted is its discount operation. Explus is a regional jet service on bigger planes with first-class seating. Economy Plus is a section of seats with more legroom, and p.s. is a premium transcontinental service from New York to San Francisco and Los Angeles.
Brace said United has improved load factors – a measure of how full planes are – by two points with Ted, and Ted’s market share is up 10 points.
For those who fly coach, United’s segmentation strategy often means more of an “a la carte” type of flying.
Lower-end customers pay extra for Economy Plus seating, for redeeming frequent-flier awards over the telephone, for food in domestic economy class and for alcohol in Atlantic/Latin economy class.
Separately, Brace said, though United has already cut labor costs significantly, it needs to cut other costs further. He expects efforts to improve productivity will bring in $300 million in benefits in 2006.
United plans to spread out traffic at hubs, shorten the time it takes to turn aircraft from arrival to departure, improve passenger and baggage handling, outsource more maintenance work and call-center work, increase automation of call centers and increase online penetration.
Those efforts will help United grow capacity by 2.5 percent to 3 percent this year, he said.
Staff writer Kelly Yamanouchi can be reached at 303-820-1488 or kyamanouchi@denverpost.com.
