Except, UA has never enforced the carry-on restriction for Premier travelers, so I'm not sure that your reasoning applies.

None of the airlines really want to sell BE fares. In this particular case, AA is betting that they will get more high-yield traffic by offering premier benefits on BE flights, with the logic being that the traveler will select AA for high-margin flights (likely business travel) because they can save money on their low-yield flights (likely personal travel). If they thought that the net result of this move would be simply to shift low-margin traffic from UA/DL, they wouldn't bother.

If you want a reason why UA might not match, I can give you two: (1) UA believes that their network is incentive enough to win business, and (2) UA has really seemed to emphasize passenger yield to an even greater degree than the competition. They could conceivably decide that these passengers would end up sticking around whether they match this particular offer or not, or that, if they were willing to buy a BE fare, they weren't worth chasing anyway.

Another angle on AA’s take: for the past decade I’ve been an EXP in addition to being a 1K/GS on UA depending on the year. When AAdvantage transitioned to their revenue based system the sweet spot for earning on AA became discounted premium cabin partner fares...e.g. QR’s R fares (think P fares on UA). This resulted in my earning 90% of my requal on AA via partners, not the native carrier itself, flying an excellent J product.

I mention this because AA allowing elite benefits on their BE fares represents a massive win for such a strategy: you get the best of the pricing world [cheap tickets], you get the best of the loyalty world [elite perks], you weed out competition from fellow elites who may not requal where they once would of [any change which makes it harder for others - but not you - to earn elite status is on the surface a plus for you].

If UA were to match this you’d see a similar sweet spot arise where a customer could use “UA domestic” for BE fares + elite benefits, “UA international” with non-BE fares / PPoints Upgrades, and “premium discounted partner” fares to round things out. In essence UA, like AA, would leave their domestic network open to BE + elite benefits customers IF such customers flew enough on international and/or partners.

On a deeper level there’s the philosophical take: if someone qualifies as a GS (or even a 1K with $18k) one could argue the loyalty of such a customer is proved by the five - or six - figure spend on the carrier. And yes, I get the, “we want to incentivize the GS/1K to spend even more!” argument and even though I see it being applicable in 2019, I just don’t see it being the case in 2020.

If I were UA I’d use this time to experiment. People get we’re in a state of flux so see what works. Perhaps UA offers tweaks to BE - for example, allow premier’s to pick their seats but only at the check-in window, or allow GSs CPUs on BE fares, or allow Plats/1Ks to only upgrade if they’re willing to use PlusPoints. You get the idea. Key point is there’s plenty of possible tweaks and we’re in an environment where people are willing to accept change.

Sure, but in 2019.

The demand question airlines face today is one of sustenance, not excess. With the present challenges of 2020 - plus whatever else awaits us :rolleyes: - when the door closes and a seat is not filled, it spoils and is lost forever. The key issue is getting someone in a seat that would otherwise spoil for enough revenue to offset the variable cost while trying to avoid depressing fares paid by other passengers. I do think you’re 100% accurate [ IF ] overall travel demand is strong. In this case the carriers can be more punitive selective in tailoring their fare products, loyalty schemes, etc. to refine the passenger mix. Disincentivizing BE in favor of pushing a passenger to a higher yielding fare makes sense here as either way the seat’s gonna be filled...it’s just a question of how much juice can the carrier squeeze from the pax.

In 2020 the key assumption [strong demand] is no longer present. UA doesn’t have the 2019 luxury of being choosy, they need to stimulate demand to the extent they can. The problem I see is UA’s toolset is optimized for a strong demand market (M+, PlusPoints, etc.) and no amount of bonuses, upgrades, etc., are going to overcome a fear/medical based concern in the traveling public...be they once-a-year flyers or six-figure globals. This leaves price which can spur demand but even dropping price can only do so much and it comes at the cost of crashing yields.

In any event I’d chuckle at the belief ANY carrier would turn down a paying passenger as long as the revenue the carrier received exceeded the variable cost of servicing the passenger in favor of an empty seat.

Which is exactly why UA would be loathe to try this strategy -- it's friendly for the customer, but not so much for UA. (I suspect they're not very happy with AA at the moment).

UA has clearly shown that they don't have this POV -- you would have made the same argument that earning 100K PQMs proved loyalty. Incidentally, the phrase "loyalty program" would make Orwell proud. They're marketing programs, and their only purpose is to try to sell airfare. Now, you may be right that this strategy will be ineffective in 2021 (2020 is a lost cause), but it's also possible that UA could just reset the bar (by lowering the PQD targets) without changing their philosophy.

If they can't sell seats at the fares they're offering, do you really think that some tweak to the BE program is going to make much difference?

And what has UA's response been? Massive capacity cuts to attempt to offset the massive demand drops.

Then drop the BE concept entirely. The only purpose that it serves is to offer an unpalatable alternative to regular economy, and thus to get people to pay more. If you're looking to make BE more attractive, as a way to sell more BE fares, you're forgetting why you created it in the first place. (And perhaps AA has forgotten exactly that).

I understand and support UA's basic economy approach in general. My only wish for additional premier benefit is to allow premier members to choose a seat for free in advance, even if it is only limited to E- section.

Could be UA's miffed at AA but the larger point here is the irrelevance of UA's preference when facing demand falling off a cliff. Beggars still can't be choosers in 2020.

Whoa there. Full stop.I speak for myself, you do not...if you're going to strawman - which no one should be doing anyways - at least learn how to do it with grace and style.

Consider this angle: since capacity still spoils, even with schedule cuts, why not use this time to experiment and see what works? What has UA got to lose? After all, as you note: "but it's also possible that UA could just reset the bar (by lowering the PQD targets) without changing their philosophy."

I'd build upon that and suggest UA's response has been to loosen their grip on trying to squeeze revenue from their customer base. Lower fares are a good (perhaps the main?) example of this but you also see it play out with other changes too. Consider the PQP reductions, public hoopla over the elimination of the change fees*, and so on. The key point here and major problem the carriers have IMHO is even if they were to cut fares to virtually $0, you'd still not have enough demand due to macro factors outside the airlines' control. It doesn't matter how generous the rewards are or how cheap the ticket is if the average customer is afraid to travel by air.

*Yes, there's the valid point of no residual value. I cite this as an example showing how UA is spinning changes with the ultimate goal of driving revenue to themselves and not just out of the goodness of their hearts. See the no-more-change-fee thread for discussion the pros/cons of this.

Again I find myself in agreement up until the end of 2019 but don't think you can carry forward these assumptions into 2020. If BE is a tool allowing legacies to sell rock-bottom fares to capture incremental revenue for otherwise spoiled seats, then any carrier in today's environment would be a fool not to offer such a product.

Prior to 2020, every BE fare sold may have been a "failure" due to the fact a customer who would have paid more was displaced by the BE customer. But the even larger failure is if the seat went out empty when it could have gone out occupied by a customer paying a fare in excess of the variable cost. IMHO for 2020 the risk from spoilage is far greater than the risk of losing out on incremental revenue, and as such, the logic which once could describe BE as a failure is no longer applicable. Will this change back sometime in the future? I'd guess yes. When? No idea.

My apologies: I meant to write "could," not "would." To me, the introduction of PQDs in the first place was evidence that UA was more interested in how much money I gave them than whether or not I chose UA each time I flew. You're certainly welcome to have a different opinion. :)

Too many confounding variables.

And, these are the confounding variables. How do you know whether or not your experiments are successful?

But you don't need BE to do that. Just drop your regular fares. The entire purpose of BE is to offer an alternative for the consumer to reject.

That's not what I'm saying: my argument is that each sale was a failure because UA failed to achieve its goal of getting the customer to buy up to regular economy.

Agreed -- but, once again, BE has nothing to do with that.

By this logic, if someone chooses another carrier because the BE restrictions are too onerous, then BE is an even larger failure.

Remember -- UA did not drop their fares when BE was introduced. They replaced their least-expensive fares with BE, and increased the price of regular economy from there. Yes, there have been occasional reports of BE fares that are actual sales -- for example, I've seen hub-spoke 0-advance-purchase BE G fares with no corresponding regular economy fare; these lead to the several-hundred-dollar difference that you'll sometimes see reported on last-minute purchases. The vast majority of (domestic) BE fares, though, are offered at a $25-40 one-way discount to regular economy. Rather than try to make the BE fares more palatable, they could just drop the BE concept entirely, and it works out approximately the same.

It's not just UA which faces some tough times. Its business customers do as well. Pre-pandemic, I fully agree that UA did not want to sell BE. Now, it has an entirely new role. Increase the differential between BE and Main and fool around with advance purchase a bit and you make back part of the hole created by the change fee.

Large corporate customers work on percentages and realize that most tickets do get flown. If, once in a while, a ticket has to be tossed, that is a cost of doing business.

I'm actually surprised by the number of companies that buy nothing but refundable tickets. When I was travelling IAH-LHR fairly regularly for work, the department assistant seemed amused I researched my own travel plans and specified dates/flights/fare class/cost. Everyone else just got refundable tickets. I bet in the long run, they would have been better paying change fees for flexibility or losing value once in a while.

I'm not sure how much the drop of change fees will change things. Companies usually don't want to (if they bought non-refundable tickets) allocate time/resources keeping track of non-used instruments.

I can't see many oil companies specifying BE fares for travel.

No, you don't. Increase the differential between BE and Main and the justification for purchasing Main goes down. Thus, this would have the exact opposite effect -- it would cause yields to drop.

Which is precisely why you wouldn't do what you're suggesting. As soon as you make the difference between BE and Main large enough that the business chooses BE, you've tanked your revenue.

I understand what you're saying: removing the change fee makes the Main fare more valuable, vis-à-vis BE, and so you think UA can collect some of that difference in a larger spread. I just don't think the difference is as large as you're stating. If, in a $200 change fee world, the average person would change their flight 10% of the time -- which might be high, honestly -- then UA could conceivably raise the spread by $20. I don't see grounds for raising it much further than that. (And, again, they're hamstrung by what their competitors do; prices will move, more-or-less, in lockstep).

I think all fares will go up. I don't think the gap between BE and Main will change much. But I think I'm repeating myself at this point. :)

The problem is, that can all be automated. That's part of SAP's sales pitch for Concur -- when I go to book a flight for work, if I have a canceled ticket on the account (as I currently do), it'll give me the opportunity to re-use it automatically.

I could see this getting complicated for consultants and anybody who has to be able to bill each trip to a particular client code -- but there are ways to deal with that when writing contracts. Even if you're prohibited from reusing a cancelled ticket for client A when traveling to see client B, as long as client A is willing to pay for a ticket that was purchased in good faith but not used, everyone may still come out ahead with nonrefundable tickets.

If crude prices don't rebound, they very well might see the light. Everything becomes open for examination when one is tightening one's belt.

Sure, fares will go up, but they can't price themselves out of the markets where a ULCC is competing either, or they'll miss out on the type of customer that makes airfare purchase decisions based on one single criterion. There's a limit to how much they can raise the fares, and in any case, I don't see it rising past 2019 levels very soon. Not compensating for the loss of change fee revenue in any way would result in unsatisfactory bonuses and dividends, which will lead to unhappy shareholders demanding that C-suite folks are re-accommodated and their seats go to new faces who know how to run a modern airline properly by putting profit above customer-friendly.

So I believe we agree that the legacies will eventually find a way to operate with even more profit even without change fees, but I don't see how they will accomplish that by raising fares only. I resonate with others above who say the legacies could basically evolve towards the EU model more or less, where the cheapest available changeable fare does in fact on average come at a significant differential vs the cheapest available Economy fare, and said differential will be controlled by algorithm (granted, the change fee was also dynamic, but fare differential makes that even easier). It's the perfect way to keep the $0 change fee promise. Prefer to keep your options open? It's just $412 more for a fare with our Guaranteed $0 Change Fee Promise (fare differential applies). And along with that, the algorithms will also control and raise the base fares themselves again.

But I could be missing something and I'm curious if you could "change my mind" by elaborating more on how you see this happening with jacking up all fares, potentially pricing themselves out of the "cheapest fare" positions in competitive markets, without alienating the frugal leisure customer?

BE was sold as a way to compete with the ULCCs. They sometimes actually use it for that; they could continue to do so. When I say that all fares will rise, I'm excluding the sale fares that really do mimic ULCC fares -- the $59 ORD-MIA BE fare when the regular fare is $399.

OK, but I think we have to throw out 2020 at this point. I don't think it's possible for any of the legacy airlines to make a profit in CY2020. So, I think we have to start with a baseline of "fares having moved back to approximately where they were previously."

Well, I doubt anyone is going to be complaining about unsatisfactory bonuses except the management team themselves. :D But, yes, we're in agreement here -- once things get back to normal, UA will try to find a business model that restores its former profit margin.

That depends upon how much revenue they're really making from change fees. If the mean number of changes per ticket sold is 0.1, then they need a $20 average fare increase. If it's 0.05, they only need a $10 increase.

So, this is where it just doesn't add up. If you keep BE fares where they are, and try to make the money up by raising the regular economy fares -- while simultaneously making those more attractive to your most frequent travelers (the subject of this thread) -- you are simply going to drive more passengers to your BE product. You will have the exact opposite effect of what you're looking for.

In fact, in a low-demand situation, it makes much more sense for UA to narrow the gap than it does for them to raise it; if shrinking the differential by a small amount enables you to upset a few more customers from BE, you'll come out ahead.

The one thing I'm sure of is that the larger you make the gap between BE and regular economy, the more BE fares you're going to sell. You can't build a successful airline based upon relying on your customers to make uneducated decisions. Eventually, people will start to look to see if they're getting value for their money, and paying an extra $400 up front to protect a $200 investment just isn't going to represent value very often.

Well, in that case, our opinions are not that far apart.

To avoid misunderstanding, I believe that with "regular Economy" you mean the domestic fares that used to be changeable after payment of a penalty?

I propose that offering a non-BE Economy product at what used to be regular Economy fare levels has no commercial raison d'être anymore, as the $0 change fees cannibalize the sales of lucrative Flex/Unrestricted Economy fares. My basic assumption is therefore that BE fares will gradually but silently increase to the pricing levels of what used to be regular Economy - and ultimately the customer will be offered a choice between Basic "no changes" Economy and Flex "$0 change fee" Economy at a significant premium.

UA may not have wanted anyone to buy BE when there was regular economy, but when BE becomes a more profitable regular economy - same prices, just not the perks - that may no longer be the case. Note this doesn't mean that BE couldn't be offered at ULCC fare levels anymore, it would depend on the market, sales, and algorithm.

If the theory above holds, Flex Economy would continue to be targeted at those who don't foot the bill or those who are more anticipating last-minute changes, and APRs will prevent last-minute BE sales to keep that offer attractive. Then why ask a $50 differential when they would just as easily shell out $500?

At the same time, BE will already be expensive enough for the leisure traveler when it is priced at regular Economy levels, there's no reason to expect they'd be willing to pay even $10 more for the privilege of making the changes that they don't anticipate anyway.

Yes -- the lowest available fare that doesn't have the BE restrictions.

OK, I have a couple of issues with that.

1 - There are a lot more differences between BE and regular economy than changeability, even under the assumption that UA matches AA's policies. For non-premier members, you've still got seat assignments, carry-on bags, etc.
2 - I'm not sure that flexible fares, sold in advance, are really that big of a contributor to the bottom line anymore. I know that some people on the board buy them, due to whatever policies they have in place, but I have to think it's a drop in the bucket for UA overall. I suspect that most flexible fares they sell are actually the least expensive fare at that time -- walk-up fares, basically. I say this not just based on my own experience, but also the fact that UA has been selling quite a few flexible domestic fares on a $50 one-way basis. They don't exist in every market, but I feel like I've seen them more and more. That tells me that they weren't worried about cannibalizing the sale of Y/B fares domestically -- they wouldn't be selling flexible S fares otherwise.
3 - For anyone who's buying the flexible fares in the first place, I wonder if the refundability is as important as the flexibility.

I mean, if they think they can price BE at the old regular economy prices, they surely will, but they would have done that whether they got rid of change fees or not.


I just don't think the numbers work out.

By getting rid of regular economy, and forcing all of those passengers to choose between BE and full-flex, you're giving up the most successful fare increase in history, and giving everybody who was buying regular economy a $30-$35 discount each way, to try to make sure that people won't stop buying the flex fares. You need a lot of flex fares to make up for that difference. I just don't think they're out there.

At some point, they won't shell out the $500 though. They'll start buying the BE fares and throwing them out if necessary.

I mean, I've routinely, angrily, paid the BE buy-up, and nearly all of my travel is leisure. Losing the premier benefits just wasn't worth it. Frankly, even AA's one restriction -- no premier qualification on BE -- might be enough to make me want to pay a premium -- but likely with even more resentment.

And I think many people would pay $10 as insurance against having to make a change.