United CEO slams low-cost airlines as carrier grows basic economy
United Airlines CEO Scott Kirby offered a bleak outlook for ultra-low-cost carriers — which have been struggling with sluggish domestic travel demand — 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.
Kirby's comments on the Wednesday earnings call followed a LinkedIn post Tuesday, where he said ultra-low-cost carriers will be "forced to make adjustments."
"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."
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.
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 at a conference last month that they are forecasting significant losses for the third quarter.
Landing gear in the kitchen? Touring United's renovated Chicago headquarters in the Willis Tower
"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.
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.
This isn't the first time Kirby has criticized the ultra-low-cost carrier business model. In 2019, Kirby said the business model is one the carriers "are not in control of" at the Skift Forum Asia.
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.
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.
Snazzy to the MAX: Putting United's newest cabin to the test
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.
Kirby also took a swipe at Frontier, referencing the carrier's policy that cracked down on passengers trying to take a carry-on-size bag as a personal item in order to avoid paying the ancillary fees.
"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."
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.
"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 on long-haul international, United is able to give our customers the real choice they want."
Related reading:
TPG featured card
at American Express's secure site
Terms & restrictions apply. See rates & fees.
| 3X | Earn 3X Miles on Delta purchases. |
| 1X | Earn 1X Miles on all other eligible purchases. |
Pros
- Delta SkyClub access when flying Delta
- Annual companion ticket for travel on Delta (upon renewal)
- Ability to earn MQDs through spending
- Various statement credits for eligible purchases
Cons
- Steep annual fee of $650
- Other Delta cobranded cards offer superior earning categories
- Earn 100,000 Bonus Miles after you spend $6,000 or more in purchases with your new Card within the first 6 months of Card Membership and an additional 25,000 bonus miles after you make an additional $3,000 in purchases on the Card within your first 6 months, starting from the date that your account is opened. Offer Ends 04/01/2026.
- Delta SkyMiles® Reserve American Express Card Members receive 15 Visits per Medallion® Year to the Delta Sky Club® when flying Delta and can unlock an unlimited number of Visits after spending $75,000 in purchases on your Card in a calendar year. Plus, you’ll receive four One-Time Guest Passes each Medallion Year so you can share the experience with family and friends when traveling Delta together.
- Enjoy complimentary access to The Centurion® Lounge in the U.S. and select international locations (as set forth on the Centurion Lounge Website), Sidecar by The Centurion® Lounge in the U.S. (see the Centurion Lounge Website for more information on Sidecar by The Centurion® Lounge availability), and Escape Lounges when flying on a Delta flight booked with the Delta SkyMiles® Reserve American Express Card. § To access Sidecar by The Centurion® Lounge, Card Members must arrive within 90 minutes of their departing flight (including layovers). To access The Centurion® Lounge, Card Members must arrive within 3 hours of their departing flight. Effective July 8, 2026, during a layover, Card Members must arrive within 5 hours of the connecting flight.
- Receive $2,500 Medallion® Qualification Dollars with MQD Headstart each Medallion Qualification Year and earn $1 MQD for each $10 in purchases on your Delta SkyMiles® Reserve American Express Card with MQD Boost to get closer to Status next Medallion Year.
- Enjoy a Companion Certificate on a Delta First, Delta Comfort, or Delta Main round-trip flight to select destinations each year after renewal of your Card. The Companion Certificate requires payment of government-imposed taxes and fees of between $22 and $250 (for itineraries with up to four flight segments). Baggage charges and other restrictions apply. Delta Basic experiences are not eligible for this benefit.
- $240 Resy Credit: When you use your Delta SkyMiles® Reserve American Express Card for eligible purchases with U.S. Resy restaurants, you can earn up to $20 each month in statement credits. Enrollment required.
- $120 Rideshare Credit: Earn up to $10 back in statement credits each month after you use your Delta SkyMiles® Reserve American Express Card to pay for U.S. rideshare purchases with select providers. Enrollment required.
- Delta SkyMiles® Reserve American Express Card Members get 15% off when using miles to book Award Travel on Delta flights through delta.com and the Fly Delta app. Discount not applicable to partner-operated flights or to taxes and fees.
- With your Delta SkyMiles® Reserve American Express Card, receive upgrade priority over others with the same Medallion tier, product and fare experience purchased, and Million Miler milestone when you fly with Delta.
- Earn 3X Miles on Delta purchases and earn 1X Miles on all other eligible purchases.
- No Foreign Transaction Fees. Enjoy international travel without additional fees on purchases made abroad.
- $650 Annual Fee.
- Apply with confidence. Know if you're approved for a Card with no impact to your credit score. If you're approved and you choose to accept this Card, your credit score may be impacted.
- Terms Apply.
- See Rates & Fees