<\/p>\n
United Airlines<\/a> CEO Scott Kirby offered a bleak outlook for ultra-low-cost carriers \u2014 which have been struggling with sluggish domestic travel demand \u2014 during a call with analysts Wednesday morning.<\/p>\n “We also expected and now believe it’ll happen even faster, that the domestic market is going to see a shakeout,” he said during the call.<\/p>\n Kirby’s comments on the Wednesday earnings call followed a LinkedIn post<\/a> Tuesday, where he said ultra-low-cost carriers will be “forced to make adjustments.”<\/p>\n Want more airline-specific news? Sign up for TPG’s free biweekly Aviation newsletter<\/a>.<\/b><\/p>\n “What’s different this time, however, is that the lowest margin airlines are the so-called low-cost carriers, and that’s where I think the changes are going to occur,” Kirby wrote on LinkedIn. “As a result, United is going to emerge in a structurally stronger and sustainable position.”<\/p>\n While travel has boomed since pandemic-related restrictions were lifted, demand has begun to soften, hitting ultra-low-cost carriers the hardest. Ultra-low-cost carriers offer a bare-bones short-haul service to primarily leisure destinations with no premium products. That’s now costing them customers who are opting to splurge on more expensive long-haul flights and premium products.<\/p>\n As a result, airlines are expecting a rougher fourth quarter and start to 2024, with an outsize impact expected for the major ultra-low-cost carriers like Spirit Airlines, Frontier Airlines and Allegiant Airlines. Spirit and Frontier also told investors<\/a> at a conference last month that they are forecasting significant losses for the third quarter.<\/p>\n Landing gear in the kitchen? Touring United’s renovated Chicago headquarters in the Willis Tower<\/a><\/strong><\/p>\n “There are only so many seats Florida, Cancun or Vegas can support in such a short period of time,” Andrew Nocella, United’s chief commercial officer, said on the call.<\/p>\n Daily Newsletter<\/p>\n Reward your inbox with the TPG Daily newsletter<\/p>\n Join over 700,000 readers for breaking news, in-depth guides and exclusive deals from TPG\u2019s experts<\/p>\n<\/div>\n<\/div>\n Ultra-low-cost carriers have also been squeezed by rising fuel and labor costs, putting further pressure on the ultra-low-cost carrier business model that doesn’t generate revenue through premium cabins or lounges.<\/p>\n This isn’t the first time Kirby has criticized the ultra-low-cost carrier business model. In 2019, Kirby said<\/a> the business model is one the carriers “are not in control of” at the Skift Forum Asia.<\/p>\n Kirby’s remarks come as United plans to grow its basic economy class, hoping to further sway travelers away from its ultra-low-cost competitors. United saw major gains in its basic economy offerings as third-quarter revenue for the seat class rose by 50% from the same period last year.<\/p>\n The Chicago-based carrier is betting that the travelers who fly with ultra-low-cost carriers will instead flock to United for its low fares and premium products.<\/p>\n Snazzy to the MAX: Putting United’s newest cabin to the test<\/a><\/strong><\/p>\n Nocella said on the earnings call that basic economy comprises 12% of United’s domestic passengers and is expected to be even more competitive in the market following the arrival of larger aircraft, which will allow United to add more basic economy seating.<\/p>\n Kirby also took a swipe at Frontier, referencing the carrier’s policy that cracked down<\/a> on passengers trying to take a carry-on-size bag as a personal item in order to avoid paying the ancillary fees.<\/p>\n “I mean charging people $99 at the gate and paying your employees a commission to take their purses away crossed the line,” Kirby said. “And so while they’ve gone in one direction, we’ve gone the other with an improved product.”<\/p>\n The decision to expand basic economy is also part of United’s strategy to offer a wide array of products to remain competitive in the industry.<\/p>\n “All the way from basic economy, which just allows us to compete profitably on price on the low end,” Kirby said, “and all the way up to Polaris<\/a> on long-haul international, United is able to give our customers the real choice they want.”<\/p>\n Related reading:<\/strong><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":" United Airlines CEO Scott Kirby offered a bleak outlook for ultra-low-cost carriers \u2014 which have been struggling with sluggish domestic travel demand \u2014 during a call with analysts Wednesday morning. “We also expected and now believe it’ll happen even faster, that the domestic market is going to see a shakeout,” he said during the call. 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