United expects $3.1b a year from no-frills airfare

United Continental Holdings Inc (UAL.N) will generate billions more dollars per year from programs including no-frills fares and expects a key revenue measure to fall less steeply in the second quarter than previously forecast, the airline said on Tuesday.

United said it expected an extra $3.1 billion in operating income per year by 2018 from the efforts, which include steps to delay fewer flights and win back corporate customers from rivals.

The company, the third-largest U.S. carrier by passenger traffic, also said passenger unit revenue would fall between 6.5 percent and 7.5 percent from a year earlier. It previously forecast a decline of as much as 8.5 percent.

The announcement, along with a conference call for investors later on Tuesday, aims to outline how Chicago-based United plans to catch up to rival Delta Air Lines Inc (DAL.N). United has lagged Delta in on-time flights, satisfaction scores and profit margins, although its new chief executive officer has promised significant improvements.

“United’s prior bench tended to duck and weave on the topic of whether its margin deficit was structural or self-inflicted,” JPMorgan analyst Jamie Baker said in a research note on Thursday. “We expect the event to usher in a new era of transparency.”

This is the first time United has disclosed a dollar figure for a planned fare class – about $150 million by 2018 – that is expected to not permit upgrades or advance seat assignments for those who book it. The fares will help the carrier compete with discounters such as Spirit Airlines Inc (SAVE.O).