n late March, United Airlines
president Rono Dutta stood before the Corporate Travel World
conference and admitted the obvious -- that United's pricing
structure is broken.
United was suffering, he said, because fewer business travelers
were using unrestricted, full-fare tickets. "United's structure was
designed for the business traveler. We've built it, and you're not
I think this was said as an admission of poor design rather than
the casting of blame at his audience. Of course, he chose his words
carefully -- he could have said, "We tried to attract you with very
high fares, but failed to anticipate that you would instead choose
United was betting that business travelers would pay almost any
price for flexibility, but it turns out that many have noticed that
they can write off quite a few nonrefundables -- or gamble that
they'll have to pay the change fee -- for less than the cost of a
full-fare, refundable ticket.
More on United and its plans to fix what's broken later. Let's
look for a moment at what America West has done to its pricing
In March and April, America West simplified its fare structure,
reduced walk-up prices, eliminated Saturday-night-stay
requirements, got rid of most of its Internet discounts and reduced
its fares to seven categories: peak, off-peak, 14-, seven- and
purchase and refundable and nonrefundable walk-up tickets.
Seven's still a lot, but it's a number most people can get their
America West claims the pricing change is a success, and that it
has already made progress toward its stated goals of increasing
One notable difference between America West and United is that
America West was never dependent upon full-fare business tickets --
only 5% of its revenue comes from these fares.
Nonetheless, United president Dutta called America West's move
"devastating." (He also commented that "business fares aren't too
high -- leisure fares are too low.")
I would like to see United (and other large airlines not yet
willing to admit their systems are broken) healthy again. They're
facing a real problem, especially competing with airlines like
America West, JetBlue and Southwest, which seem to be attracting
travelers with low fares and simple fare structures.
It's instructive to remember that America West has had its share
of problems over the years, and seems to have managed to reinvent
itself. I've been looking for some sign from United to see what it
might do -- clearly, something radical is needed.
Well, last week we finally heard something. United sent a letter
to travel agents announcing that it was instituting new, internally
developed technology to root out back-to-back ticketing, and gave
yet another warning to agents against issuing these types of
I hope that United, which has faced devastating losses recently,
didn't spend too much money developing a technology that can be so
easily defeated and will most likely result in spreading some
business to competitors.
With its earlier admission, United clearly recognizes that
flyers have options -- it acknowledges that it can't force
travelers to follow its strategies. If United now reminds travelers
that they face penalties by buying back-to-back tickets on United,
travelers don't have to be Einsteins to realize that they can buy
one of the "back-to-backs" on United and the other on American, and
there's very little, if any, chance they'll be caught. In that
case, the only one experiencing a penalty is United, which has sent
a little business to American to help reduce its excess
United seems to be stuck in its old model, where it tries to set
rules to get people to buy for retail what it sells for wholesale.
Instead of trying to prop up an old system the airline admits is
broken, it's time for a serious overhaul.