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What you don't get with United's new economy fares

11/15: MoneyWatch Headlines
11/15: MoneyWatch Headlines 01:07

United Continental Holdings (UAL), which has been lately promoting its upscale new Polaris business-class service, today announced something for customers on the other end of the spectrum. Passengers who purchase the carrier’s newly announced Basic Economy fare tickets will be permitted only one carry-on bag -- and it must fit under their seat. 

Rather than preselecting seats, Basic Economy customers will be assigned seats on the day of departure. And they’ll be the last passengers boarded. 

Airline luggage tracking 02:01

According to Julia Haywood, United’s executive vice president and chief commercial officer, customers have demanded more choice in their travel options like Basic Economy, which will be available in January. These passengers will otherwise enjoy the same amenities as those purchasing “standard economy” tickets, such as food and Wi-Fi services, when they’re available. 

To industry observers, the move by United, which is looking to gain an edge against low-cost carriers such as Frontier and Allegiant (ALGT), was expected.

“It’s not surprising that they’re getting into the game now that they needed to do it,” said Emily Fisher, a spokeswoman for Cheapflights.com. “You may not be able to pick your seat until the last minute, and you may have other places where they cut their corners with you, but at least when you’re on the plane you’re going to get the same experience as the other customers.”

United CEO Oscar Munoz has been under pressure from Wall Street to bolster the Chicago-based company’s bottom line and improve its customer service, long criticized for being inadequate. He has made progress on both fronts. The new Basic Economy fares are part of a plan the carrier announced to add $4.8 billion in profits by 2020 by delaying the delivery of some new Boeing (BA) planes among other things. 

United recently noted that 75 percent of all mainline and regional flights during the busy summer travel season were on time, a 5 percent increase over the same period in 2015 and a 10 percent jump compared with 2014. It also recently named Kate Gebo to the newly created position of senior vice president for customer service delivery.

“The people who are buying these tickets are buying them based on price not on reputation and brand,” Fisher said, referring to the Basic Economy fares. “The people who are more interested in customer service and loyalty are the business travelers who are trying to build their status and are flying on a regular basis.” 

United also plans to overhaul operations at its hubs in Newark, Chicago and Houston by changing flight times and adding larger aircraft to better meet customer demand. The carrier says these moves will add $900 million in incremental revenue by 2019.

Shares of Chicago-based United Continental were trading up 5 percent, or $3.17, to $66.11 on Tuesday afternoon. Billionaire Warren Buffett recently took a position in United, American Air Lines (AAL) and Delta Air Lines (DAL), reversing his longstanding aversion to investing in the sector, which he had likened to a “death trap.”

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