Not old or that wise but its simple math.

Frontier and Spirit do not make money on $20 dollar fares. Those fares by design stimulate demand. Frontier and Spirit make their money on their $100-$300 dollar fares (and ancillary revenue).

So how does UA (or DL/AA for that matter) compete with the ULCC's much lower cost base?

By doing exactly as Kirby wants to do.

First, the "global gateways" derive most of their revenue from the huge international network United has. Spirit and Frontier obviously can't touch that revenue at all.

The growth Kirby is talking about will come from the mid continent hubs, ORD, IAH, DEN, and its a two pronged exercise.

First, the hubs are being rebanked to allow more connections and to increase aircraft utilization which drives down cost.

Second, adding small markets to the hub allows United to tap revenue from towns that are too small for a LCC or ULCC to serve. Doing so increases traffic flows and bolsters yields on the larger, more competitive routes. Adding these destinations in turn makes even more small airports possible by increasing the number of possible connections.

For example, if you have a hub with 300 daily flights and 50 cities served, you might be able to trap 40 passengers a day to (insert small regional airport here). If you increase that to 500 daily flights and 70 cities, that number may rise to 60-75 passengers per day thus making the destination viable. By adding 10-15 of said routes, thats potentially 800-1000 new passengers per day coming through said hub.

Now, how does this allow a legacy to compete? Frontier and Spirit by design are already super efficient. They tend not to create mega hubs, because the fixed costs associated are extremely high. Their bread and butter is point to point routes with rock bottom fares to stimulate demand. They also grow to keep unit costs down. This generally works because even their high fares aren't really that high, so you typically don't have to worry too much about RASM falling a legacy on the route isn't willing to compete.

Now circling back to United and the inital talk of ULCC fares, United competes by tapping traffic that the ULCCs simply can't in small markets. There isn't enough O&D demand or the quasi ULCC hub simply isn't big enough.

This in turn fills the majority of United's aircraft higher yielding connecting traffic. United then can sell basic economy to fill the rest of the cabin matching the higher-tiered ULCC fares.

Once United does that, with price being equal, nobody in their right mind books Spirit or Frontier over United. Those passengers get more leg room, entertainment, a seat that reclines, and free refreshments all at the same price.

Thus if there isn't enough O&D traffic for both carriers, the ULCC loses the higher-tiered fares that actually turn a profit.

Case in point:

In 3Q17 Spirits RASM plunged a breathtaking 6.3%, and its profit margin fell to 11ish%. It will be much more difficult for a ULCC to grow aggressively in a legacy stronghold than it will be for said legacy to defend it.

Oh, and ULCC labor costs will go up, not down, only adding more cost pressure to the bottom line.