United refines revenue management of Economy Plus through new Shares platform

Now that disruptions from a complex cutover to a new passenger service system have ended, United Airlines is starting to reap the benefits offered by the Shares platform that allow the carrier to fine tune revenue management of its Economy Plus offering to maximise the revenue-generating potential of the differentiated seating product.

United was a first mover in creating and deploying a premium economy section when it debuted the product more than a decade ago. Its major US competitors Delta Air Lines and American Airlines are following suit, as are other carriers across the business spectrum, including Canadian low-fare pioneer WestJet.

With the kinks from the cutover largely ironed out, United can now focus on using the Shares functionality to mature its revenue management of Economy Plus. Company CEO Jeff Smisek recently explained to investors that with the old passenger service system United could only offer a fixed price for Economy Plus. “Because of the power of Shares, we can dynamically price Economy Plus,” he explains. “By seat location, by day of week, by row, by airplane, by load factor on that airplane, so we have the ability to revenue manage those seats and enhance our ability to collect revenue from our Economy Plus product.”

United made its cutover to the Shares platform in March of this year, and the flexibility the system offers the carrier is flowing through to its bottom line. Recently  chief revenue officer Jim Compton stated United’s second quarter ancillary revenue was up 11% year-over-year, “largely due to our conversion to Shares, which enables dynamic pricing, improved targeting and bundling of ancillary products and services”.

Economy Plus revenues soared 25% during the second quarter, driven by favourable revenue management and the product’s availability on 86% of United’s mainline fleet of roughly 700 aircraft. Compton remarks that sales of the new seats on offer accounted for roughly one-third of the quarterly improvement in Economy Plus sales.

At the same time United is working to maximise revenue from its extended legroom product, the carrier is planning to roll-out new technology offerings during 2013. Smisek says the airline plans revisions of its mobile application next year to offer additional functionality.  The additions are both valuable to United in delivering favourable customer service and “for customers to take more control over their travel experience”,he says.

United’s rival American is also planning to build out its current mobile offerings as a means to enlarge its ancillary revenue streams. Recently the carrier explained to the APEX editor’s blog  that its customers have indicated interest in an ability to purchase expedited security or a better seat on their mobile devices. Dallas-based American has already conducted trials for mobile applications that would allow customers to pre-purchase items from the airline’s buy-on-board menu.

There is no doubt United will be closely watching American’s developments in exploiting mobile applications to generate revenue. “The fact is everyone today has a kiosk in their pocket,” said Smisek. “We’re very focused on our high margin businesses, our ancillary products and our loyalty programme.”