United Airlines CEO Scott Kirby predicts that budget carriers like Frontier Airlines and Spirit Airlines are “going out of business” due to their customer-unfriendly policies. That may be the case, but recent policy changes at both carriers suddenly make their value proposition much different than in the past…
United Airlines CEO Kirby Sees No Future For Frontier And Spirit
Kirby sat down for a fascinating interview on The Air Show podcast with Jon Ostrower, Brian Sumers, and Brett Snyder.
This isn’t the first time Kirby has thrown shade at the so-called “ultra-low-cost carriers” in the USA, but never in such detail.
“It’s a fundamentally flawed business model. The customers hate it, the customers have voted.”
It is true that the low-cost carriers have struggled while full-service carriers like United Airlines nad Delta Air Lines have flourished over the last year.
Frontier Airlines CEO Barry Biffle famously complained last autumn that “you’ve got fuel, capacity, and demand all headed in the wrong direction, we’re kind of the canary in the coal mine.”
A “canary in the coal mine” means an early indicator of potential danger or failure.
But Frontier has been bold in not accepting the status quo. It has added guaranteed blocked middle seats for those who wish to enjoy and recently eliminated change fees, which strike at the heart of the ancillary revenue model.
Spirit Airlines, the largest budget carrier in the USA, has followed Frontier and also eliminated most change fees.
But Kirby believes that these recent changes are untenable for a budget carrier, calling it an “internal acknowledgment that the business model doesn’t work.”
Kirby mocked charging passengers $99 for a carry-on bag and incentivizing gate agents with a commission to stop people from boarding with bags that are too large.
“They haven’t treated customers right…You can do it once, but you don’t get to do it to them twice And those airlines grew big enough that they actually need repeat customers.”
But United is alone among legacy carriers in prohibiting carry-on bags when purchasing a Basic Economy fare. American Airlines and Delta passengers who purchase a basic economy ticket are still permitted a carry-on bag and personal item in the cabin. With United’s investment in new bins that can accommodate every passenger’s larger carry-on bag, the punitive approach to basic economy tickets is questionable.
CONCLUSION
Kirby, who has undergone somewhat of a metamorphosis from bean counter to premium proponent since joining United Airlines, disagrees with the low-cost business model. Biffle says “lowest cost always wins” while Kirby believes, “He’s dead wrong…Best service always wins.”
I’m not sure if either one is correct. Rather, customers are smart enough to run a cost/benefit analysis on a trip-by-trip basis to see which option makes more sense. In my case, it is almost always United, though I will fly Frontier if the price is right.
Do you think Kirby’s dire predictions will come true?
It take crystal balls to presume to read the future. Especially after every bank CEO has forecasted the fall of the American economy and dollar for the near future.
The value of the dollar is not really relevent to most people and certainly not to a global airline like United. Internally, of course, he value if the dollar compared to other currencies is irrlevent. And when the dollar is strong is discourages foreigners from coming here.
So a weaker dollar just means the share of international traffic shifts from US origin to foreign origin.
And, of course, in trade, a weaker dollar means US exporters have a field day.
If best service wins then devaluing your loyalty program to the point of it being worthless may not exactly fit within that context.
The airline that wins is the one that finds the right balance of frequency, service, reliability, rewards, and pricing.
@ Matthew — THIS customer likes their business model very much. Why pay DL triple to fly on a 45 minute flight in first, only to be denied service half the time due to “turbulence”. It is pathetic cheapness by Delta. The employees at Spirit have all been extremely friendly in my 10-15 or so flights, and I have yet to see even arguing on the plane or in the gate area. Kirby is basically openly wishfully thinking.
How dare you mock the world’s #1 PREMIUM airline. Wait til my daddy shows up!
@ Matthew — Spirit’s food is WAY better than United’s.
The business model that seems pointless to me is that of ‘full service’ carriers that don’t sell any economy fares that include luggage (it’s one thing to exclude it from the bargain basement categories and quite another to kill it off altogether) and offer ‘first class’ flights without meals. No effort to build and market an attractive product, and no wonder they can only really make money through the North Atlantic cartels and the FFP credit card industry.
@Matthew, can you do a post about full-service carriers (especially UA) and their seating options? Every time I consider UA, I go with a competitor because of their insanely high seat prices and limited free options.
€20 on a 4-hour intra-Europe? Ok, but I might just wait for check-in. $90 on AS PC transcon with early boarding and included drinks? Maybe. $150-200 for UA E+ transcon or $250-300 longhaul? No way. At $600 extra r/t, might as well buy PY on a competitor.
I have just booked a jet2 flight that’s about 4 hours long. It wasn’t very cheap but the *A options didn’t make much sense (overnight connections, inconvenient departure airports etc). Reserving 1C was only £12.50 on top of the base fare. Adding a suitcase was £40, and a full hot meal would have been another £10- I will only take snacks with me because I don’t eat the rice/potatoes/pasta that (quite reasonably) seem to come as sides with their meals. My flight in the afternoon, but morning departures also benefit from twilight check in at no extra charge. For someone without elite status, the product is hugely compelling- if you pay the extra for priority security and lounge access you’re getting a product that basically beats LH business class.
He wishes……
Does he mean Southwest too? Or is he talking about the ULCCs exclusively?
I think he means ULCCs only.
The problem they’ll have now is that flight attendants face poverty wages with their day turn scheduling. Recently spoke to a few who were applying to other airlines because without the per diem of a 3 or 4 day trip, their paychecks completely unlivable. While the revolving door helps keep labor costs low, it will make it very difficult to maintain a schedule when people keep leaving and having to constantly hire nonstop just to keep up with those exiting.
As a normal consumer (no status), United, spirit and frontier are all the same to me. I just need a carry on bag and a seat. Since they all charge for those things, they’re all the same!
Especially now that United got rid of its full meal service for most first class domestic flights ( I know, I’ve got to let it go lol). And while I think United seats are better than Frontier’s, they are so cramped. I personally feel like United is a better experience but I understand what you’re saying.
UA certainly a better value and I do value things like extra legroom, power, and wi-fi.
I don’t want to pay higher fares for the extras such as carry-ons that I don’t need so Frontier is my first choice. Haven’t flown United for at least three years since AA and Delta include a free carry-on in their fares when I don’t travel light and United fares are not as competitive.
United hires DEI pilots and has been having serious safety issues because of it. They put off the street hires in the Captain seat who have never even flown the type before starting there. It’ll be quashed of course, but make no mistake, it’s a safety hazard. They stopped prioritizing training record and experience and now hire based on gender and skin color. It’s a recipe for disaster and there are already a disturbingly high amount of close calls as of late. Frontier provides an excellent service. The more you pay the more you get. Why pay 400 more per ticket for a can of coke and a bag of pretzels? They are improving every year. Kirby is wrong. They fly decades old gas guzzling aircraft as well and Frontier has the newest and most efficient planes in the country today. Fuel savings alone will win in the long run in this business.
United flies decades old gas guzzling aircraft*
Frontier has the newest and most fuel efficient fleet in the country.
Call me old fashion. I fly Southwest. I need a flight. I buy a ticket that includes my bags, and a seat, go to the airport and get on the plane without having to be a rocket science to figure out what my fare is. I have been doing this since Southwest was flying only between Houston, Dallas, and San Antonio.
The Big 3 airlines are suing the government to keep from telling you what your fare is at the beginning of booking. The are saying you are bright enough to figure it out after a few layers of add ons while of booking your flight.
The problem with Kirby is that nobody believes he has really had a transition. United food is among the worst airline food even in premium cabins. The Ice Cream Sundae alone doesn’t make up for that.
The Polaris lounges have effectively been downgraded and the one in Dulles for example is a total Zoo. I preferred finding a place in the terminal over trying to find a place to sit down in the lounge it was that crowded. And no I was not on cheap upgraded ticket.
I’ll fly United only if they are far less expensive than virtually any carrier. I definitely prefer flying American internationally, Delta and of course the many real premium carriers.
Kirby deserves credit for his bet that there are enough people out there to squeeze. Just look at the insane qualification requirements for “Elite” status. But at some point there will be a recession and all the flyers no longer loyal to that airline or have now flown the many other carriers out there it will cost him at an inopportune time. But then again he will be first in line for another government bailout should they be in financial trouble. Hopefully politicians will learn the benefits of letting an airline or two go out of business.
I think Mr Kirby doesn’t understand the American consumer. He should talk about customer service, United’s customer service sucks. I just had a 2 hr flight where no snacks where served because flight attendants said it was too short. United’s policy is snacks on all flights over 500 miles, this flight was 700 miles.
Which route?
On the back of these comments, will Untied be introducing customer friendly policies and staff with manners?
Both are currently missing.
United is barely a step above AA.
The main thing that keeps me from flying ULCCs is their lack of options during IRROPS. There’s no recourse for the passenger when they cancel your flight. Sure, they refund your money but that doesn’t actually help you get where you need to go.
If you fly sometimes, but not enough to maintain status – the so-called budget airlines may be an excellent option for you. The costs are easier to control versus what experience you end up receiving. The big downside to them is what happens if things go wrong and your flight is canceled. Then you’re in trouble with these guys. But this is rare enough that the infrequent flier my not have to experience that.
A commenter above mentioned Jet2 (from the UK). From what I can tell, they’re an excellent budget carrier. They’re a leisure airline, who also sell entire vacation (“holiday”) packages. But their flights go from easy to reach airports to popular destinations; their flights seem relatively comfortable, with friendly crews and usually run on schedule. They have found a great niche. Perhaps Frontier and Spirit can do the same.
United forces basic economy to check in at the airport so employees can verify you don’t bring a carryon. How is that different from Frontier checking at the gate? This Kirby guy is such a liar
United airlines customer service isn’t that great either.
Let’s hope not for the sake of us who avoid them like a plague. Their “customers” will be forced to choose mainline airlines whose customer base has sunk to new low’s in recent years as it is.
Why do LCCs thrive in Europe and SE Asia but not in the USA?