US domestic airlines: segmented fares, changing customer behaviour

Premium Analysis

The US domestic airline market is arguably the most mature in the world, which means traffic stimulation opportunities are more limited than in other emerging regions.

But ultra low cost airlines believe that market concentration in the US creates opportunities to lure the infrequent traveller into taking more trips, and they’ve grown rapidly in the market during the last decade. 

US full service airlines have also opted to court the infrequent traveller through the introduction of segmented fares, featuring a basic economy option. Although segmented fares seemingly allow those airlines to compete more effectively with ULCCs, they’re really a way for American, Delta and United to drive customers into higher fare buckets, and ultimately grow their revenue.

At the same time, segmented fares are evolving as US major airlines seem to be moving towards deploying a higher number of premium seats in the US domestic market as fare segmentation spreads. 

The country’s largest lower cost airline, Southwest, has also declared that it is preparing to launch new ways to drive revenue in 2020 as it regularly fields questions about its response to product segmentation in the market place. 

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