Scott Kirby, United CEO: Cheaper tariffs don't win loyalty
As the airlines prepare for the gradual return of bookings, United Airlines is taking a page from the hotels playbook.
The hotels' brand loyalty approach is particularly appealing to airlines heading back to higher passenger demand. Scott Kirby, United's CEO, spoke to investors during a call for earnings about how the airline might position itself versus corporate customers if business travel rebounds (sometime) in a post-Covid world. Although he did not provide specifics on strategy, Kirby said the current industry mentality of relying heavily on “price to get customers” needs to change.
"Hotels do a remarkable job of having brand equity, getting customers to like them, and getting customers to be loyal for reasons other than price," said Kirby. "Getting our customers to like us and choose us because they like us, like what they stand for, and they trust us instead of competing on price."
Hold a place for loyalty
While United is unlikely to reveal any brand spin-offs, Kirby's argument highlighted the importance of relying on loyalty programs and going beyond cheap flights to entice travelers. While every airline is still stuck in the pandemic, they are looking for differentiators that will help them attract new businesses from the pandemic.
Delta’s commitment to block the middle seat has apparently paid off: Last week, the airline announced to investors that the decision would generate a “significant premium”. Although the middle seats are open, American Airlines is also seeing a loyalty boost. An airline representative told Adweek that 40% of new travelers have been converted to their loyalty program.
Airlines are hoping any new customer earned as part of the pandemic will pay off later, as United doesn't expect a significant recovery until 2023.
Though the Christmas break made a boom, United's earnings were, as expected, bleak. The airline posted a net loss of $ 1.9 billion in the fourth quarter and $ 7.1 billion for the full year 2020. At the start of the new year, they expected operating revenue to decline 65% to 70% for that quarter , with capacity decreasing 51% compared to 2019.