United Airlines CEO Calls Out Ultra-Low-Cost Carriers

There is always a method to the madness.

In this case, United Airlines CEO Scott Kirby has criticized ultra low-cost carriers, just as his own brand is trying to boost sales of Basic Economy seats.

Kirby said in a recent call with analysts that the low-cost carriers have "crossed a line" and that their model of offering cheap tickets without premium amenities is unsustainable due to a sharp decline in domestic travel.

"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 followed a LinkedIn post in which he said ultra-low-cost carriers will soon face a day of reckoning.

"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. "As a result, United is going to emerge in a structurally stronger and sustainable position."

Demand for short haul flights has begun to decline in favor of increased service on international routes. Low-cost carriers such as Spirit and Frontier have already told analysts that they expect earnings to decrease in the third and fourth quarters.

"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.

Kirby also took a direct shot at Frontier for its new policy on cracking down on passengers who try to bring a carry-on on a flight and pass it off as a personal item just to avoid paying an extra fee. "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 CEO said that, at the end of the day, he believes that people are willing to pay more for something like Basic Economy if they know they are going to get more. 

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