American Airlines started selling ‘basic economy’ fares two months ago.
These fares try to make the travel experience difficult enough that you’ll spend more for less restrictive tickets.
- Last group to board, no full sized carry on allowed (“personal item only”).
- No residual ticket value for changes, no same day changes or standby, use it or lose it.
- Seat assignments at check-in or for an extra charge 48 hours before travel.
- No upgrades.
- 100% of redeemable miles and elite qualifying dollars (which are earned based on fare), but only 50% elite qualifying miles and 50% elite qualifying segments.
- No re-accommodation on other airlines if your flight goes mechanical, and bottom of the list for automatic re-accommodation on other American flights.
These fares were launched in 10 markets:
And now the airline has data on how the fares are doing.
During American’s earnings call airline President Robert Isom suggested 50 percent of customers who are presented with a choice for Basic Economy end up choosing a more expensive ticket. At least that’s how it’s been reported, but that’s not exactly what he said.
In the 10 launch markets, half of the eligible Basic Economy passengers have bought up to the main cabin, which is right in line with our forecast.
Here he’s only talking about people who actually bought tickets on these flights and not customers who searched for flights, saw all the restrictions on American’s lowest fares and abandoned their bookings or simply booked another airline.
Isom is really saying that 50% of people being offered Basic Economy and who still buy an American Airlines flight choose to avoid Basic Economy because it’s so miserable. Those customers spend more money.
The claim does not actually demonstrate success for the Basic Economy initiative. Some passengers will pay more than they otherwise would have. Some passengers will book Basic Economy. And some passengers who would have bought tickets from American Airlines will decide not to be their customer.
Of course Delta’s basic economy isn’t as punitive, you can still bring on a full sized carry on bag. Southwest, Alaska, jetBlue and Virgin America don’t impose restrictions like no carry on bags on any fares, in fact at this time Southwest doesn’t charge for checked bags or charge flight change fees.
In other words, at the same price point most of American’s competitors are offering more value. The question of how many customers figure that out and do what’s in their best interests is an empirical one.
Travel is complex and confusing, there are transaction costs in understanding what you’re buying and making comparisons, so you can assume not everyone will sort this out on their own. But if enough people do Basic Economy won’t be a profitable strategy, let alone part of the $1 billion a year American thinks they’ll generate from Basic and Premium economy ‘customer segmentation’ projects.
I expect American to announce continued success regardless of results.
“The question of how many customers figure that out and do what’s in their best interests is an empirical one.”
^^ This is the big point, as you say. I, and others on this blog, follow this stuff relatively closely, and I get confused all the time about this stuff. I can only imagine the once or twice a year traveler.
Gary, right again. We dissed American for Delta and we were pleasantly surprised!
Purchased over 10 tickets on Southwest the past 3 days. United missed out.
Haven’t darkened the door of an American flight in 2017. So I’ll be the statistic on someone’s spreadsheet as a Platinum customer who jumped ship.
I wouldn’t pay basic economy if I could avoid it. I wouldn’t pay more for regular economy. I am sure I can find somewhere to go on Southwest instead.
Gary, great job calling them out on this BS!
Isom said, “In the 10 launch markets, half of the eligible Basic Economy passengers have bought up to the main cabin, which is right in line with our forecast.”
Gary wrote, “Here he’s only talking about people who actually bought tickets on these flights and not customers who searched for flights, saw all the restrictions on American’s lowest fares and abandoned their bookings or simply booked another airline. Isom is really saying that 50% of people being offered Basic Economy and who still buy an American Airlines flight choose to avoid Basic Economy because it’s so miserable. Those customers spend more money.”
@Gary —> How would Isom know? When I searched an AA flight between two cities where Basic Economy is offered, what came up on my screen was an option for “Main Cabin” and “First.” Am I being offered “Basic Economy” but AA is calling it “Main Cabin”? Nowhere is there even an option for me to choose between “Basic” and [regular] “Economy.” And if I intended all along to book “First,” is Isom claiming I was offered “Basic” but “bought up”?
(Sigh) Yet another nail in the coffin — for me — for American (and, as far as I’m concerned, the other two legacy carriers). I’m flying AA in June, but bought the ticket using Citi ThankYou Points and am crediting the mileage to AS, not AA.
I will never purchase one of these fares, period. At any possible time I will “buy up” to regular economy on another carrier, even if it means a connection over an AA non-stop. I simply will not put up with this and will not give AA the satisfaction of a buy up to a regular main cabin fare unless it is entirely unavoidable for a given situation.
Just did a comparison CLT-MCO Sat 7/15. AA wants $203 for basic economy, $243 for regular economy. Allegiant flies out of Concord (North Charlotte) to Orlando Sanford, $66. Not even close, even after you account for mileage, irrops recovery, several misc Allegiant fees, etc.
Basic Economy is just making your product worse in hopes your customers will want to give you more money. We should not be fooled.
AA and UA are making choice of airlines MUCH easier for me!
This is the equivalent of any business selling their Product in a ruined, poisoned or dysfunctional state so that consumers will be forced to buy a higher priced version of it. Why should we not be surprised that the Mileage trainwreckers would offer something that would require a return of Monty Python to properly advertise to consumers?
Big 3 “Customer Service” after being forced to stop the beatings: https://www.youtube.com/watch?v=LkHPCmC_bzg
The only way American will learn is if people wise up and dump them for their competitors. US airlines are really crap.
Keeping calling them out on their B.S. Gary.
We need to support the carriers that are relatively not bad. Book preferentially on Alaska, JetBlue, Southwest. Or, if looking for a bargain price, book on Spirit, Frontier or Allegiant. Do not accept this nonsense from AA, UA and DL (to a smaller degree) if you can possibly help it
My flowchart for booking travel now for both work and personal is basically: Does Southwest fly there? If yes, fly Southwest. If no, can I fly Southwest to somewhere close enough to drive there or should I consider a new destination? If for work, I may have to book elsewhere but that is very rarely since i’m based in Houston. Can’t stand the big 3 US airlines and their nickel and dime approach all while providing horrid customer service. Especially for work travel where I need flexibility and the ability to change a ticket last minute for no fee (HUGE win for Southwest). Even being based in a United hub I’ve flown them maybe 3 times in the last 3 years yet i’ve earned companion pass on Southwest (mostly from flying) for 5 years running. But sure AA, whatever you say about everyone buying up from basic economy. Ha.
@DaveS —> Well, I won’t book on Spirit, Frontier, or Allegiant EITHER! And for similar reasons . . . that said, except for European travel (when I typically flew a non-US carrier), I *refuse* to fly Spirit, Frontier, or Allegiant, and I *try* not to fly AA, DL, or UA either.
Since April 2007 — in other words, in the last 10 years — my domestic flights have been as follows:
— VS, 104
— WN, 64
— UA, 21
— AA, 10 (last flight, 2009)
— AS, 4
— B6, 4
I just experienced this flying from Dallas to DC. I bought my ticket at $414 online. As I understood it – that’s good enough. I check in for my flight on my iPhone 24 hours before I leave. I am presented with a diagram of the plane – all seats hatched out as “unavailable.” Four open seats for an extra $16. I’m on a small screen (missing small print) and pressed for time. I pay the $16. Turns out they are simply “forcing my hand” making me think I must upgrade to get on the plane. I admit I am not the most saavy airline traveler. But this strikes me as flat out unethical, false advertising, or a bait and switch.
My wife has to be in Orlando in June, and so I went online shopping via Momondo and Kayak. AA offered basic economy CLT – MCO but the upcharge from basic to “normal” was well over $100 return, rpicing at around $475. So we ditched that idea. Found a “hacker fare” of two one-ways, outbound on Frontier, return on AA that was less than 2/3rds of what AA wanted for regular econ. Sure, Frontier charged for seat selection and luggage, but the actual flight ticket cost was $27 before taxes and ancillaries! Looked at Allegiant out of Concord or Columbia, SC but the dates and times did not work.
What I did not like in either Momondo or Kayak is that the default lowest price presented in a search is basic economy on any of the Big 3 carriers, when available. There should be an option to exclude these basic fares.
AA seems to be positioning themselves as the carrier to avoid. At some point, basic economy, (dis)AAdvantage earnings, award pricing and lack of availability will come back to bite them.
The legacies are enjoying the current restrictions on the Gulf carriers, but other administration moves will weaken international demand and eventually impact domestic demand as well.
Time will come when the legacies will try to claw back those they have recently pushed away.
“Bought up to the main cabin…”. Remember when Basic Economy was launched that it was supposed to be a cheaper fare. But then Gary called them on that too showing how the former economy was now more expensive. Keep pounding the drum Gary.
Hey Gary, you and Lucky should team up to write a few posts on the AAbysmal AAward AAvailability every week.
@Maarten —> “Sure, Frontier charged for seat selection and luggage, but the actual flight ticket cost was $27 before taxes and ancillaries!”
No, the actual flight cost $_________ INCLUDING seat selection, luggage, taxes and “ancillaries.”
I purchased TWO tickets on Emirates (JFK-MXP) for $2 each! That was the “actual flight cost.” It’s also bullish*t.
2 passengers, Economy Special Fare
Airfare……..Carrier-imposed charges…….Taxes, fees, and charges…….Cost
USD 4.00………….USD 596.00……………………..USD 189.32…………..USD 789.32
So the two tickets cost me $789.32 . . . NOT $4.
Trying to figure out the least painful way to kick AA to the curb out of DFW. Travel monthly or maybe twice a month, looking for solutions if anyone has any suggestions.
@Nick I switched to Southwest. They fly direct to many domestic destinations now. With the further lift of Wright amendment, they can add even more direct flights. For international travel, do foreign airlines. Sometimes you have to do one stop but why bother earning useless AA miles if you cannot redeem them?
@Gary, et. al.: Note that every one of these ten (10) American routes with Basic Economy are where AA is the only airline offering non-stop flights. Essentially, they have the market covered over the competition–meaning, there is no competition! For example, I could fly CLT>MCO on UA or DL in E for less than AA is charging for E, but those flights UA and DL flights have a change and are not non-stop.
I can see A A getting away with this in those markets where they operate non-stop flights, but in any other situation, where all the big 3 are on equal footing, meaning, none offer a non-stop flight, then AA would dare not “force” the buyer into the position of uprading into Main Cabin for more money than DL or UA are selling their Main Cabin seats. I wonder if, in that situation, AA would sell E- seats for less than E seats on the other two airlines.
A lot of fluid algorithms here.
Hey didn’t I just read in another article you published that AA is offering if pilots an extra 6-8% and flight attendants 4-6% across the board raise to lesson the tensions between frontline and management. I guess AA figures they will bait and switch or play 2 year games with the public to pay for those raises
No mention of United Basic Economy? It’s truly the worst out of the big 3. It has all of the negatives with BE and you don’t earn any premier qualification at all. None, zero. Completely destroys loyalty and I’m afraid that the other carriers are going to notice.