This is a story about a big change in the works at United Airlines.

It's also a broader story about how any company can develop direct relationships with its customers--in the hopes those customers will become more loyal.

Here's the background, the bold change, and what this means for United, Southwest, and every other U.S. airline.

"Our lowest fares."

There are a lot of ways you can book a ticket on United Airlines. You can go directly to United, of course. 

As with many other airlines, a significant number of passengers also book through third-party sites: Expedia, Orbitz, Kayak, and many others. 

However, the airline industry has changed significantly in the past few years. 

There are fewer airlines now (due to consolidation). And the economy is healthier now than it was a decade or so ago, so airlines aren't as desperate to fill seats at any cost. 

In general -- in any industry -- when you allow aggregators to bundle your product or service with your competitors, you get customers who make decisions based on lowest cost.

And that explains why United has apparently been maneuvering to cut ties with Expedia. 

"Expedia has historically been very good in selling our lowest fares," Andrew Nocella, United's chief commercial officer, said on an earnings call this week. "But quite honestly, we think we can sell our lowest fares just as well. ... We look forward to having a direct relationship with our customers going forward."

"Expedia tried to stop us."

The context of all this is that Expedia sued United earlier this year, trying to prevent it from getting out of its deal to provide fare and schedule information to the aggregator.

But if the call this week portends the future, it sounds like United is ready to depart from Expedia at almost any cost.

"We'll be moving on," Nocella continued. "Expedia tried to stop us and quite frankly failed."

United president Scott Kirby chimed in as well, saying, "We've assumed ... that effective at the end of September, we will not be in Expedia."

As Brian Sumers at Skift points out, there is some possibility this all amounts to posturing.

Five years ago, Kirby was president at American Airlines, and he pulled American out of Orbitz -- although ultimately American and Orbitz reached an agreement.

But if it is just posturing, it sounded pretty darn serious on the call this week.

"This is time to change," Nocella said. "Companies need to evolve and innovate, and we here at United have changed a lot."

More like Southwest.

I've written before about the ways United and Southwest differ. They're not really in the same market--Southwest is more explicitly a low-cost carrier, with a more exclusively domestic route map, and fewer models of aircraft.

But they both seem to understand that more than just selling seats on an airplane, they're really selling an experience. The more you can do that effectively, the more you can get away from being a commodity provider, and the more you develop a relationship directly with your customers. 

One of the ways Southwest has done that is that it has very rarely authorized third party aggregators to include Southwest information or tickets.

While we're talking.

It's not just the airlines that face these questions.

If you're selling consumer products, you have to decide how much of your business you're willing to get from Amazon.

If you're in the media business, you now have to decide if you're willing to take a massive discount on what you normally charge, in order to be included in aggregators like Apple News Plus.

At the end of the day, it's about whether you think your customers care enough to be loyal to you -- or if you think they're only going to view you as a commodity. Whether you can offer them something that makes them come to you, on your platform.

Or whether you're happy to blur the differences between yourself and your competitors--and give a big piece of your profits to someone else.

The best brands will survive and thrive. The others, well, they'll they'll all wind up competing for the lowest-dollar and least loyal customers. And in so doing, they'll show just how weak they really are.

Published on: Apr 21, 2019
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