United Continental Upgrades Service on 1 Key Route

Flat-bed business class seats on United Airlines

Last week, airline giant United Continental (NYSE: UAL) officially announced that it will add Boston-San Francisco to its premium transcontinental route network as of July 1. This means going forward, United will feature lie-flat seats in business class on that route. It will also offer upgraded food and amenities.

These changes, first reported in April by FlightGlobal , are being driven by rising competition for high-paying premium passengers. With JetBlue Airways (NASDAQ: JBLU) and Delta Air Lines (NYSE: DAL) both offering lie-flat business class seats on the Boston-San Francisco route now, United had no choice but to do the same.

Transcontinental service goes upscale

Back in 2004, United Airlines invented the concept of using a dedicated fleet of planes with a premium configuration on transcontinental routes. This has become the industry standard for flights from New York to Los Angeles and San Francisco.

In recent years, airlines have started to bring upscale service to other transcontinental markets. Most notably, JetBlue began aggressively expanding its Mint premium service last year.

Initially, JetBlue launched Mint to compete better with other airlines' premium offerings in the New York-Los Angeles and New York-San Francisco markets. However, Mint was so popular that JetBlue decided to upgrade its Boston-San Francisco and Boston-Los Angeles routes to Mint service last year. These routes exceeded expectations as well. As a result, JetBlue is in the midst of expanding Mint to seven more transcontinental routes.

The success of Mint has helped JetBlue gain market share in transcontinental markets. It has more than doubled its capacity on the New York-Los Angeles and New York-San Francisco routes in the past three years. In the coming months, it will add a fourth daily flight on its Boston-San Francisco and Boston-Los Angeles routes.

United Continental remains the market share leader on transcontinental flights from San Francisco, including seven daily flights to Boston. However, JetBlue is clearly challenging its dominance.

Delta enters the market

Delta Air Lines' entry into the Boston-San Francisco market appears to have been the last straw for United. Last fall, Delta announced plans to begin flying twice a day between Boston and San Francisco. While neither city is a Delta hub, the carrier has been bulking up in these key markets recently: especially Boston .

Delta's new Boston-San Francisco flights begin later this week. In March, Delta announced that it will operate this route with its premium transcontinental service, featuring flat-bed seats in business class. It will even offer free meals in coach on Boston-San Francisco flights.

With JetBlue and Delta both offering premium amenities on the Boston-San Francisco route, United was clearly at risk of losing the loyalty of some of its most lucrative customers in spite of its dominance in San Francisco. This clearly isn't an acceptable outcome.

United tries to improve

United still has two big advantages in the Boston-San Francisco market. First, it has a very strong hub in San Francisco. Second, with seven daily roundtrips on the route, it offers far more flight options than any other airline. This is particularly important to business travelers.

Thus, United Continental doesn't necessarily need to offer the best in-flight product to remain the carrier of choice for most business travelers on the Boston-San Francisco route. It just needs to offer "good-enough" service.

To meet this standard, United will offer "Polaris" lie-flat seats in business class for all flights between Boston and San Francisco beginning on July 1. At that time, United will enhance its service for business-class customers on all of its premium transcontinental routes, with a new signature cocktail, pre-arrival hot towel service, and an updated in-flight menu.

United Continental is also taking a cue from Delta Air Lines by offering free meals to Economy Plus customers on its premium transcontinental routes. After all, many business travelers don't travel in business class due to company travel policies. However, United still won't offer free meals to regular economy passengers, unlike Delta.

These enhancements will get United back in line (roughly speaking) with competitors such as JetBlue and Delta in terms of the amenities offered on Boston-San Francisco flights. Given the carrier's superior schedule, that should be enough to stay competitive -- for now. But with airlines increasingly competing on service, United Continental may need to consider further upgrades to its transcontinental service in the coming years.

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Adam Levine-Weinberg owns shares of Delta Air Lines and JetBlue Airways and is long January 2019 $10 calls on JetBlue Airways. The Motley Fool recommends JetBlue Airways. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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