Good morning. Phil Wahba writing from New York this morning. If it seems like airfares keep climbing—but you keep paying anyway—that’s all part of the plan, at least at United Airlines. There, CEO Scott Kirby has been working on a long-term “premiumization” of the airline’s offerings, and his playbook is relevant to any CEO looking to squeeze more margin out of the same customer base by selling them a better version of what they already buy.
“Demand is strong,” Kirby told Wall Street analysts on a conference call last Thursday. “United has proven that our brand loyalty strategy is working, and we’re using today’s environment to accelerate our investments in all aspects of the customer experience from nose to tail.”
Industry-wide, prices for domestic routes are up 35% this year, and international fares are up 15%. But this isn’t just a reaction to higher fuel prices—it’s a strategy that has been years in the making.
As I wrote for Fortune recently, major carriers, most notably and successfully United and Delta Air Lines, have spent years persuading customers to pay more for tickets by investing in much improved services. The two airlines have built their businesses around higher-spending travelers, international networks, and lucrative loyalty programs.
