US air fare wars: Basic Economy vs ULCCs shifting network focus

Although US ULCCs Spirit and Frontier combined represent just 6% of the country's domestic market share, their rapid growth during the last few years has changed market place dynamics in the US. The result of their proliferation is US majors segmenting their pricing structures to compete more effectively with low cost competitors, but also to improve their overall revenue management schemes.

The changes American, Delta and United have made in their pricing tiers have largely lived up to expectations. American and Delta have stated upsell rates from their Basic Economy offerings are roughly 50%, and believe segmented fares will drive billions in revenue improvement.

Now that fare segmentation is fully entrenched in the US market, the country's major airline's are focusing on maximising connectivity at their hubs to drive up yields and create a new line of defense against ULCCs in their hubs.