One of the world's biggest airlines is drastically cutting perks to compete with budget airlines, and now some passengers will be charged for using overhead luggage compartments.

Skeptics say the new class, which United Airlines calls "Basic Economy", it more akin to "Misery Class". Passengers will be the last to board, seats will be assigned on the day of departure (meaning people on the same ticket may be split up), they won't accrue airline miles, and they can't bring any cabin baggage except a handbag or laptop bag that will fit under the seat in front.

It's the third-largest in the United States by traffic, and it's facing fierce competition from low-cost rivals. They estimate the initiative will add $A6.4 billion to their operating budget by 2020.

"Customers have told us that they want more choice and Basic Economy delivers just that," said Julia Haywood, United's executive vice president, in a statement.

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"By offering low fares while also offering the experience of travelling on our outstanding network, with a variety of on-board amenities and great customer service, we are giving our customers an additional travel option from what United offers today."

Realistically, it's expected United will lure passengers in on a low fare before upselling the ticket. Adding a bag, for example, will cost an extra $A33.

Consumer groups are less than thrilled.

"This action clearly shows how airline consolidation is eliminating choice," Charlie Leocha, chairman of consumer advocacy group Travellers United, told the Huffington Post.

"Simply stated, this is an example of airline consolidation gone too far, with choice and transparency being wrung out of the system."

The new fares will go on sale for US domestic flights next year.