American Airlines told us they planned to roll out Basic Economy fares across their domestic route network in September. I didn’t expect them to do it the day after Labor Day. Of course I suppose it shouldn’t surprise that the thing American Airlines IT delivered on-time was the least customer-friendly move in the known pipeline.
Basic Economy fares are not new lower fares. They are new restrictions on the already-existing lowest fares. Many people are confused by this, since United in particular has been misleading in its descriptions. But American has been up front about it, and never claimed otherwise.
From a few cursory searches it appears that American is now selling Basic Economy fares across the lower 48 – including on connecting flights – for travel September 12 onward.
American’s Basic Economy Fares Mean:
- 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.
Elite frequent flyers and co-brand credit card holders can board with their regular priority zones with a full-sized carry on bag.
Just because American’s IT team managed to roll out Basic Economy doesn’t mean they’ve done it correctly, for instance they appear to be having ‘the United problem’ for travel on some dates where Basic Economy is more expensive than regular economy.
Now even if you spend $30,000 a year on American Airlines buying expensive tickets, the once or twice a year you take your family on vacation you will have to spend $20 or $40 more per person each way (once American gets the IT glitches ironed out). That may be $320 extra per trip or — forget upgrades or extra legroom coach seats — you won’t even get advance seat assignments let alone sit together. So much for your loyalty.
Ultimately even Delta says Basic Economy isn’t the boon to an airline’s bottom line that American thinks it will be. And this makes Southwest, jetBlue, and Alaska Airlines far more attractive. When price is the same why would you fly American?
(HT: @jonny_m_weiss)
I suggest we all hold our comments until we hear some stupid condescending remark from IAHPHX on the subject…..
Proud to say I went from 75-80 k miles and 10k usd a year for the last 10 years with AA, to ZERO this year….it’s all with alaska, flying several superior airlines, including alaska itself, KLM, Aeromexico…
US domestic road warriors had it so much better in the 1980’s and 1990’s. More upgrades and much more value from mileage flown. For many years Southwest was handing out an unrestricted free round trip for every 4 round trips you flew!
I just have to admire the management geniuses at work. First they changed AAdvantage rules such that flying OneWorld partners, which was always more *attractive* anyway, is now more *beneficial* too than flying AA itself. Now they are forcing us to conclude that we better look at Delta, Southwest etc. 🙂
Basic Economy is too generic and it will harm what’s left of the AA image. NO CUSTOMER has the perception that “basic” does not include some basic things that AA is taking away, and they will learn the hard way. It should have at least branded with something distinct like A La Carte Class or whatever to convey some meaning.
At least part of Southwest’s appeal is the simplicity of its product, and customers like simplicity. AA is going the other way, making a complicated product more complicated.
When will airlines realize their loss from implementing these terrible changes?
@RF
that’s the problem, they are not loosing money…they may be loosing revenue from frequent fliers, both in economy and business class, but that is offset by the revenue all the extras and up sell generate from the masses….
Gary: ECON 101. The seller sells all product for what the market will bear. Competition forces fares down to marginal cost. Basic Economy is cheaper to deliver. Ergo, the equilibrium price in a competitive market is low than ‘regular’ coach.
Not quite “rolled out” flawlessly. DCA-ORD price difference between Basic Crap and Main Cabin is $1.
I applaud this change. It’s a bit fairer than the former system, where the person who paid $600 for his or her a ticket got the same (crummy) service as the one who paid $124. Now at least the $600 will get you something more, such as MORE space on the overhead bin (and, of course, FASTER boarding and less people stressed out) and MORE free seats to select.
Oh, and the guy who spends $30,000 a year on tickets and can’t afford the extra $20-$30, they can always send the family on Spirit while they attend a remedial personal finance class.
@Andrew Basic Economy is more expensive to deliver. United requires basic economy customers without checked bags to check in at the airport. Gate agents have to police rollaboards. Where is the marginal cost savings in basic economy?
@Gary: It can’t be “more expensive to deliver”, or they wouldn’t offer it. The equilibrium price would be higher than regular coach (rather than the latter being the result of IT errors).
@Andrew they view basic economy as a fare increase.
@Gary: Basic Economy costs more (you claim) and the fare is lower. Explain how that is a fare increase? According to your arithmetic it is not, so you are resting your claims on the airlines that use basic economy being ‘stupid’.
The person who told this ‘theory’ appears to be incapable of rational thought, but you should know better than to believe them. Always disbelieve someone whose theory rests on the stupidity of others, particularly when those ‘others’ are avaricious, self-interested, multi-billion dollar corporations. Best to disavow that kind of loose and sloppy thinking, regardless who told it to you.
Especially when there is an economically rational explanation. ” The seller sells all product for what the market will bear. Competition forces fares down to marginal cost. Basic Economy is cheaper to deliver. Ergo, the equilibrium price in a competitive market is lower than ‘regular’ coach.”
The fare increase comes from making basic economy so unappealing that customers spend more to avoid it.
@Andrew, Basic Economy shifts the curve to take away consumer surplus from “good deal on airfare” and makes them perform a calculation that, at least for some, says that paying the incremental fare increase yields CS while basic provides less/negative utility
“The fare increase comes from making basic economy so unappealing that customers spend more to avoid it.”
Gary: They buy the same seat they would have bought before – at the same (old) price. If the airline raised the price of regular coach, customers would go elsewhere.
So your latest theory makes no sense.
If you want a rationale for Basic Economy it is a lower level of amenity, at a LOWER cost, allowing it to be sold for a lower fare. That moves the airline down the demand curve, gaining new passengers at a lower marginal cost. Under competition, the equilibrium is a lower price than for regular coach.
This is a huge number of people. The most popular airline in Europe is Ryanair. Have you heard of a bundled amenity on Ryanair? People talk comfort, but for flights less than about two-and-a- half hours they buy the lowest price.
It is popular to moan about this, but people talk one thing, and buy another.
Civet: Re-read your comment. It is absolute gibberish.
Can’t tell if Andrew is missing the core concept of this post or just trollin’.
Andrew, if your going to make poorly conceived arguments could you at least do it more succinctly
This makes me sad. 🙁
Guess that means I’ll be flying more Spirit soon…
@AA. YUCK. Remember Paul Simon’s song 50 ways to leave your airline, or something like that. Yuck.
@Andrew. Are you like 18 or something. Last time I though that micro-economics and utility curve were explanatory of individual companies, what like when I was a freshman in college.
@Gary. Keep up the good work.
“@Andrew. Are you like 18 or something. Last time I though that micro-economics and utility curve were explanatory of individual companies, what like when I was a freshman in college.”
Reads like Hemingway.
In other words to AA is effectively charging its elites $20-$40per flight to receive or have a chance at receiving their ff benefits that were supposed to be complementary.
I would never fly on American’s new basic economy fare when Southwest grants full credit on unused tickets and no change fee. Even now, especially between St. Louis and Chicago, American is often far more expensive than Southwest into Midway. Increasingly we are taking that option. Flying into O’Hare is not worth a premium (unless you live in Rosemont).
CB
Ryan Air sucks. I wouldn’t be caught dead flying them.
I hate this stupid basic economy fare stuff. It’s time consuming to get through a reservation with this new “feature”. Who wants to go on a plane without a seat reservation? And no carry on except a personal item? Just what are they thinking?
Will stick with Delta for the time being.
@Andrew: “Gary: It can’t be “more expensive to deliver”, or they wouldn’t offer it. ”
Because we all know Airline execs are geniuses who never screw anything up, right?
If it’s more expensive to deliver, but so miserable it forces people to buy more expensive tickets, they still “win”.
Until their customers abandon them altogether.
At least when Delta started their Basic Economy tickets, they actually WERE lower priced than the previous cheapest economy tickets
@Greg D: The reported pricing was an IT bug. It is a product with less amenity, therefore cost, than standard coach so it can be priced lower. Competition will force the price down to cost.
Standard coach buyers are not affected. They continue buying that class of service and ignore the people at the back. However, one of the big trends in the next twelve months will be the massive growth of what is called ‘Basic Economy’. In Europe, the first, fifth and ninth most popular airlines are ‘pure play’ Basic Economy, and all the legacy airlines are increasing their allocation to an equivalent product.
https://en.wikipedia.org/wiki/List_of_largest_airlines_in_Europe
As I said in a thread yesterday, when it comes to air travel of less than about two and a half hours, people talk quality but buy the cheapest fare available.
Not only did the once “regular economy” advanced purchase fares become Basic Economy, for a flight that I frequently book, the new *Basic Economy* fare spiked by $10 each way, over the old “regular economy” advanced purchase fare.
The old “regular economy” advanced purchase fare was $67 each way on the route; the new Basic Economy fare is $77 each way on the route, and the former “regular economy” advanced fare is now $87 each way on the route.
So when you account for this, on at least one route, the “Regular Economy” advanced purchase fare has spiked by $20 total each way. It may not sound like much, but the fare was previously ~$67 each way, so an increase of the fare to $87 means the same product has spiked almost 23% percent!
FWIW, discounted First Class has also spiked 15% more now on the same flights, thanks to the introduction of Basic Economy fares on American.
Joy.
These new basic economy sections at the back of the planes in crappy seats will lead to an increase in basic economy sales, but it will be on other budget airlines. Would you rather be treated as the lowest class, basic low life at the back of the plane, or fly on a smart, fun low cost airline that treats everyone the same and wants you to enjoy your trip? No buy ups needed, nothing taken away from you, just get what you pay for like everyone else.
Someone should point out to the airlines that “dynamic pricing” forces a new dynamic for passengers too. A new dynamic with no loyalty, and no desire or reason to pay more for what has always been included. Now if they would put all the people flying with animals into the basic economy part of the plane, I may reconsider and pay to avoid that flea and tick section.
@Andrew “The reported pricing was an IT bug. It is a product with less amenity, therefore cost”
That does not follow. As it costs United money to enforce the “less amenity”, and as “people time” generally costs more than anything else, it’s a reasonable expectation that it costs United MORE to provide those “Basic Economy” tickets.
1: They have to create a new boarding area for the BE people, costing them space & human effort.
2: You have to check in w/ a human (cost $$) vs computer (marginal cost very low)
3: I was a Delta PM when BE came out. BE tickets were less than the fares i was used to
4: I was a United PP when BE came out. BE fares were what I’d previously paid for Economy.
So United jacked up prices while cutting services and raising their costs. I’ve jumped back to Delta. Good riddance to bad rubbish
Oh, and @Andrew, I’m curious: do you fly on your own dime, or someone else’s?
I fly on my own dime. But I often find that the people who get the most snobby & entitle about flying & benefits are the ones sticking someone else with the cost of the ticket. So I’m curious.
You didn’t mean to make this statement did you?
“That does not follow. As it costs United money to enforce the “less amenity”, and as “people time” generally costs more than anything else, it’s a reasonable expectation that it costs United MORE to provide those “Basic Economy” tickets.”
If it costs more why are they pricing them lower?
“Oh, and @Andrew, I’m curious: do you fly on your own dime, or someone else’s?”
100% mine.
@andrew
for the love of good, just STFU…
you are making a (bigger) fool of yourself by each comment
@Andrew says:
You didn’t mean to make this statement did you?
Yes, I did
“That does not follow. As it costs United money to enforce the “less amenity”, and as “people time” generally costs more than anything else, it’s a reasonable expectation that it costs United MORE to provide those “Basic Economy” tickets.”
If it costs more why are they pricing them lower?
Because the cost is the effort they have to put in to make the seats more miserable for the passengers who buy them.
Are you just not paying attention to anyone?
If it costs more why are they pricing them lower?
“Because the cost is the effort they have to put in to make the seats more miserable for the passengers who buy them.”
Complete non-sequitur. Sounds like something Dimwit Doug would say.
@andrew
Everybody is trying to explain to you why you are wrong, and just like a baby you keep repeating the same nonsense
Everybody thinks you are an idiot and yet you choose to call me names…
You are so pathetic, it has to hurt….
GFY