Last updated: 01:58 PM ET, Thu August 11 2016

How Legacy Carriers Are Returning To Their Roots To Fight Low-Cost Carriers

Airlines & Airports | Josh Lew | June 21, 2016

How Legacy Carriers Are Returning To Their Roots To Fight Low-Cost Carriers

Photo courtesy of Thinkstock

Legacy airlines are using a new strategy to differentiate themselves from low-cost carriers.

It's a change that couldn't have come at a better time. Fares have fallen recently thanks to a combination of low fuel prices and the expansion of budget airlines, so legacy carriers have attempted to match the fares of their cheaper peers on many major routes. This has made them competitive, but it has hurt their revenue numbers. 

Rather than continuing to play this price game, Delta, United and American are trying to compete by offering more value to fliers. They want to provide an overall travel experience that LCCs won't be able to match. 

You get what you pay for

Value can come in different forms. United and American, for example, have taken the simple steps of serving snacks on domestic flights, pouring premium coffee and improving the quality of food on international routes.

United CEO Oscar Munoz, under pressure from shareholders, has promised to be even more aggressive when it comes to adding value to his airline's products.

READ MORE: United Airlines Unveils New Polaris Business Class 

What is United’s approach to doing this?

United has touted its improvement in fundamental areas. This includes better on-time performance and a stronger baggage handling record. These are two basic things that the airline has struggled with in the past. 

United also sees value in offering more routes. The airline has been aggressive in its international expansion, adding unserved routes to China and Europe and taking on some of the world’s best airlines head-to-head (most recently challenging Singapore Airlines on the Singapore-SFO route).

United and its peers have also been trying to better the customer experience indirectly by improving pay and work conditions for employees. The idea seems to be that if gate agents and flight attendants feel they are being paid fairly and if they buy into what the airline is trying to do, they will be willing to offer better customer service.

Adding value where it is needed the most

The main focus of Munoz’s value-building plan, however, is to provide value to those who provide the most value to the airline in return: premium class passengers. The airline recently unveiled its new United Polaris business class cabins, which have been hailed as the most significant upgrade for United in decades. The cabins will start appearing later this year on United’s wide-body aircraft.

All three airlines have been improving their airport lounges as another part of their effort to bring that exclusive feel back to premium classes (it seems to have all-but disappeared over the past decade). New lounges have improved ambiance, better basics (USB ports and fast Wi-Fi), and individualized features like craft beers and local foods. 

In a sense, legacy carriers are trying to get back to their full-service roots. Will this prove successful? Some fliers will always opt for cheaper fares, no matter what. United and its peers are banking on the idea that most fliers will be willing to pay a few more dollars for the extra value and the better experience that they will get on legacy carriers. 


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