When United’s Basic Economy rolled out last month, I was generally in favor of the idea. The goal of offering a differentiated product to target the most price-sensitive travelers is smart, but it’s more than that. It’s necessary. Yet within days, the world was up in arms over the idea that United was going to start charging for carry-on bags. What could have been a good story was buried instantly, and much of that is United’s fault.
Just look at the press release and you get a quick sense of where this went wrong. Basic Economy was officially rolled out at investor day, targeting the Wall Street types, but the airline obviously knew this would be huge news for the traveler as well. So how does the airline introduce this to the consumer? With this press release headline:
A headline like that instantly sets off the bullcrap detector. It smacks of consultant-speak. The release went on to use all kinds of buzzwords… “more choice for customers”… “provides the added benefit for customers and employees of simplifying the boarding process,” you get the point. This launch somehow didn’t even warrant its own press release; it was buried in a laundry list that covered everything being revealed at investor day. For a company that just hired a chief storyteller, you’d think it could have done a better job of, ahem, telling a story here.
Instead, the media was looking for a simple story and this is what they heard: It’s like Delta’s Basic Economy but you get no carry-on bag or elite qualifying miles. Hearing the words “economy” and “no carry-on bag,” the media ran with headlines like “United Airlines to Charge Extra Fee For Using Overhead Bins” and “No more free overhead bin on United: Is an extra fee for oxygen next?” It became so rampant that there’s now even a Snopes entry to sort out the truth.
It gets worse. The story has staying power. USA Today ran an op-ed yesterday chastising United (it did run a sensible and far-too-short opposing viewpoint as well) using rhetoric through which it’s easy to poke holes.
What a mess. United lost its chance to control the narrative. Part of it is because of the timing. The airline launched this months ahead of it actually being available for sale, so there are still unanswered questions that can’t be discussed (like pricing). But it was more than that. The story just wasn’t presented properly.
What is the Story?
I’m not a PR pro, but were it me, I’d make this the story (a bit tongue in cheek).
You know how you’ve always hated sitting next to someone and finding out you paid $400 more for the exact same experience? It took us decades, but we finally figured out we should be listening to you more, and this is the first big step forward. Now, we’re working to truly differentiate the experience so the next time you find out you paid more than someone else, there’s a good chance you’ll have something to show for it. At the same time, if you really just need the cheapest fare possible, for the first time, we have a product specifically built for you.
This is where United should have taken my advice and put that fantastic Polaris branding effort to work at the lower end. (I still vote for Uranus.) Anything that differentiates this new offering from the existing economy product is a good thing. I actually asked CEO Oscar Munoz about this in the as-yet-unpublished part two of my interview, and he mentioned that they thought it would be too confusing and instead decided it best to use Delta’s terminology. I see it differently.
Instead, using Delta’s terminology makes it look like United is just once again copying Delta here. That’s happened so many times that people are starting to be trained to just assume that’s the case. And I’ll assume that’s right. But it doesn’t mean there isn’t a good story underlining why this is a good idea, regardless of how it came about. It does make a lot of sense when you think about it.
The Building of the Story
What you have is a new product that is truly targeting the price-conscious for the first time. United is losing those price-conscious passengers to whomever is cheapest on any given route. And increasingly, those passengers are going to the ultra low cost carriers (ULCCs) Allegiant, Frontier, and Spirit.
USA Today thinks it’s being cute with paragraphs like this one:
The airlines’ spin on this is they’re offering price-sensitive customers what they want. Frankly, we haven’t heard many customers clamoring for less or complaining that regular economy is just too luxurious.
Funny, because while USA Today may not hear people “clamoring for less,” I hear it all the time. People want fares to be less. And if that means giving up something on the product, many are more than willing to do it. If they weren’t, then Spirit wouldn’t be in business.
The current strategy for competing with ULCCs is to match fares in many markets, but it’s not sustainable systemwide. United may be making healthy profits now, but if the ULCCs continue to grow fast, those profits disappear. It’s not about United cutting existing fares in the market. It’s about United trying to find a sustainable way to offer really low fares on a grand scale. United wants to avoid having the US look like Europe. Here’s what I mean:
Keep in mind, the intra-Europe market is smaller than the domestic US market, so this is a striking difference. ULCCs absolutely dominate short-haul travel in Europe, and they continue to grow. There are hundreds of routes that you can only fly nonstop if you fly on a low cost carrier. These aren’t just tiny routes either. You want to fly from Berlin to Barcelona? That’ll be on a low cost carrier. Same goes for Manchester to Geneva or Budapest to Copenhagen. The legacy carriers have retrenched to their hubs, and even those aren’t safe. Ryanair has finally broken into highly-controlled Frankfurt. Paris sees a growing complement of low cost carriers arriving. And Alitalia is being decimated not just by its own ineptitude (though yes, that’s part of it), but by the invasion of ULCCs into Italy. On long haul, low cost carriers are ramping up ranging from Norwegian over the Atlantic to the Gulf carriers heading through the Middle East. There is no safe place for European airlines.
In the US, it hasn’t gone that far, primarily because Southwest Airlines prevented ULCCs from being necessary for many years. But Southwest’s fares have climbed dramatically in the last decade, and that has created real opportunity. The ULCCs in the US are several years behind Europe, but they are growing fast. United can’t be complacent. It needs to learn how to compete. Unlike its European brethren, United has learned that low cost carrier-within-a-carrier schemes aren’t the answer. The best answer today is to provide a range of different offerings on the same airplane to cater to different groups and their different needs. One of those offerings is a barebones product that caters to the traveler who only cares about price. Another is Polaris and its sleep-focused business class product. People will self-select into the option that fits their needs best.
Is this the right answer? It’s a new effort, so we’ll have to wait to find out. But I’m in the group that believes it is. I just wish United had done a better job of telling this story.