Last week United Airlines started selling Premium Plus, their version of premium economy. Untied announced that they would be starting service on 20+ routes as of March 30,2019. They additionally made sure to say that Premium Plus would be redeemable using your miles, a step that American Airlines has been dragging its feet on. The one thing that wasn’t known is what the cost would be to fly in the new Premium Plus cabin.
Over the past week I have been tracking award pricing on one of the first routes to get the new service from Newark (EWR) to Hong Kong (HKG) and so far the pricing doesn’t make much sense.
When I first started look at the route it only showed Premium Plus available for 140,000 United miles, an absolutely terrible deal when you consider that lie-flat Business class was available for 75,000 miles. The 140,000 seems to indicate the top of their award chart as I couldn’t imagine paying anywhere near that amount.
| North America – South Asia Miles Cost | |||
| Economy | Premium Plus | Polaris Business | |
| Minimum/ Saver | 40k | ?? | 75k |
| Maximum | 90k | 140k | 180k |
Conventional wisdom says that United Saver level Premium Plus award should fall between 40k-75k points but so far United has only release space as low at 85k points through the end of the schedule.
A representative from United Airlines said:
“Award pricing is based on routes, availability, time of booking and other factors. Over the past few days we have rolled out premium economy award options and lower awards should now appear on all routes if they are available.”
While that sounds great, were still sitting here scratching our heads at the current pricing. Hopefully United Airlines will clean this up soon. The most logical thing would be for Saver level Premium Plus awards to start at 55,000 miles. Should the product be priced any higher, it would make more sense to find a saver level Business Class award starting at 75,000 points. United Airlines does publish a formal award chart with their Minimum and Maximum Award cost although their pricing is variable in between the two limits. Premium Plus hasn’t been updated into that chart yet. This could also indicate a devaluation is coming, I would hold back from screaming bloody murder for now, as I don’t think it’s that.
Are you planning on booking a United Premium Plus award?
Feature Image Via United Airlines
So I’m not dreaming, and good to know you agree – it seems a terrible value.
As a regular red-eye flyer, I love the idea of an upgrade, but every time I look at it I just can’t bring myself to cough up the extreme amount of points. So I ride in back, and arrive with a sore neck, but then I’m fine after I get off the plane for a few hours, and then I’m glad I didn’t waste the points.
What a nasty way to treat their top customers – but then, when did that ever figure into United?
Sam,
Believe it or not, United has a strategy.
They do not want MP members purchasing Premium Plus awards. Not right away. I am betting that you are scratching your head wondering, what AM I on about?
The reason AA has been “dragging their feet” as you put it about allowing AAdvantage members to purchase awards is a similar, albeit different approach to answering a question.
That question is this: At what price point will this new product help to increase revenue on each flight without diluting revenue from their Business Class product? It is the right question and it will really drive the changes to the soft product that is offered in Premium Plus. It also will drive on what markets we will see the product first and how it is eventually rolled out to the entire fleet.
We have to remember that UA is in the middle of a decision process to determine what their fleet will look like and what it will do for the next 20-30 years. This decision is based on how these aircraft will be utilized, which sound simplistic, but having been a revenue analyst for one of the three US airlines, I can tell you that adding a product like Premium Plus is a response to the market that has caused the US3 to come kicking and screaming into the Premium Economy market. When you put this in the mix of how they must draw down their 77E aircraft, which are all over 20 years old, how you position the replacement aircraft and the product that goes on it will drive the decision of what aircraft they purchase. The A350 might be the right aircraft for them…but they aren’t married to it yet. I personally believe that they may go in a different direction.
The answer is straightforward as it relates to the 77W and the 781 as these aircraft will get the product first. While mileage awards are important to the frequent flyer, they are a liability for the airline and adding award seats dilutes the revenue on each flight. UA, AA and DL need to know how this product will impact their overall profitability before they start buying airplanes and reconfiguring others.
It is less of an issue for DL since it appears for now that their premium economy will only be deployed on the A350 and on the 77Ls that are refitted with Delta One suites. I doubt we will see it on the existing A330 fleet or their 77Es but probably on the A330neo. Don’t expect a PE product on the 763.
For AA, it is also less of an issue since they have decided to go all in with Boeing and operate the 788, 789, 77E and 77Ws and they are actively pulling down 767 flying as they get more 789s. They just have to decide in what markets to deploy the product…and that is a question of how much extra it will pull from Y and not drag out of J. There is a reason that not all 788s and 789s have the PE product…
Now let me throw another factor into this discussion: The new Boeing NMA aircraft that will be launched next year and how it will be positioned will drive a lot of decisions about how where and what products will be offered on what routes. Could a PE product work on a short transatlantic hop in a 250 seat airplane? We don’t know the answer…not yet. We know that the LCCs like Norwegian are pulling it off with the 788 and 789…could UA follow that? What an interesting notion…
UA is coming to the party late with PE and since UA is not the strongest marketing entity in the world (they have traditionally been focused on the operation), they want to have a firmer idea of how this product will affect profitability per flight before they make a firm order for new aircraft and how many of their existing aircraft get retrofitted with the Pplus product.
In order to answer that question, their Premium Plus product has to be launched and the soft product tweaked, just as they have tweaked their Polaris soft product…(if you notice, their are some differences from when it launched…very subtle but substantive differences).
So this comes back to a question of how many passengers will pay to upgrade from Economy to the new product vs the number of passengers that downgrade from Business. To get that right, they can’t have award seats diluting the yield on that class until they have a firmer idea of how to position the product.
So why is Polaris mileage less than PP? Simple. They know how mileage awards affect the revenue on each flight and they have tweaked award capacity to optimize revenue on each flight.
My advice? Just wait. UA will figure this out and over the course of the next year or so they will have enough data that they can more accurately predict how the product will impact the profitability of the routes it will serve.
One thing: Like DL and AA, it will not be rolled out across the entire fleet. I believe we will see it on the 789 for sure, since reducing the number of passengers and increasing yield will allow them to operate on routes like, ORD-SYD, which cannot be served with the 789 in its current configuration. However, with an optimized payload, it could be done. If ANZ can take a 789 from AKL to ORD, then SYD is doable, since it isn’t as far.
Knowing how profitable they can be with this new product tells them where and where not to deploy it.
Give it time…the mileage award requirements will come down. The market will drive that.
This is a lot of information…but it might give an insight into why something that obviously doesn’t make sense makes absolute sense when you look at it from a different perspective. UA has done very well with Polaris, I am certain they will find their way and their customers will eventually be able to use their award miles for PPlus.
Read through this a few times before you respond…because I am willing to bet that all of these questions (and others I did not offer) you had no idea would be a factor and drive why UA has priced their Mileage Award tickets the way they have…
Love the analysis and agree with everything your saying. My only problem is if your not ready to offer Premium Plus on award seats, dont. Take AA’s lead and hold off until you know your market.
I’m curious about the mileage chart you showed for United new Premium Economy.
I was recently trying to book award travel from SFO to EWR, and for Business Class on that route, they want 60,000 points, just for one way!
So that’s a mere 5-hour flight. Seems even more extravagant for a short flight (I wanted it for the red-eye because of the lay-flat seat).
If you check this link. (https://www.united.com/web/en-US/apps/mileageplus/awards/travel/awardTravel.aspx) you will see that if you choose North America to North American, it shows you the saver level first class ticket costs 25,000 miles and the most expensive is 50,000 miles. There is a note on the right that says they can charge up to 10,000 miles more for the transcon product, giving you that 60,000 one way milage cost. Its a terrible value but they are accurately displaying the information.
United does a terrible job at releasing domestic saver level award first class space. I wrote about it back in August here. (https://samchui.com/2018/08/02/united-airlines-everyday-awards-are-causing-a-saver-level-domestic-failure/)