American Airlines Tests Effectively Killing Basic Economy

Basic economy fares were touted by some airlines as ‘a new lower fare’ but that was never true. American Airlines, in introducing their fares, was actually honest – these were new restrictions on the existing lowest fares. And they served two purposes:

  1. Get passengers who care about comforts to spend a little more, that’s where the difference between basic and regular economy is $20 – $30
  2. Segment corporate travelers from leisure travelers, so that businesses still pay a lot more even in an era where Saturday stay and advance purchase requirements are far less common, that’s where the difference between basic and regular economy is hundreds of dollars

Most businesses, though, don’t find it successful to pursue a strategy of profit by making their product worse. When United rolled out their basic economy – more restrictive than Delta’s (no full-sized carry on bag) and before American rolled theirs out – they lost about a hundred million dollars as customers chose other airlines instead.

American found their basic economy offering wasn’t working, too. They – like United – had refused to let Basic Economy customers bring a standard carry on bag onto the plane. However they eliminated that restriction. They didn’t want to push passengers to choose competitors.

Now American is testing what happens when they eliminate the biggest remaining restriction on these fares, the inability to select seats at time of booking.

For non-elite travelers, choosing to buy up from Basic Economy means spending more money for the right to spend more money to select a seat since there are so few seats offered free, and those are often middle seats that’ll be assigned free at check-in to a Basic Economy passenger anyway. Indeed, having seats assigned at check-in often means doing better than a middle when better seats are left.

For many passengers that’s not appealing. And when customers choose the cheaper Basic Economy fare the airline is denying itself seat selection revenue. Already American started letting Basic Economy passengers pay for seat assignments 7 days prior to travel instead of 48 hours out. This test makes it possible to assign seats at booking.

This means basic economy restrictions would be limited to,

  • No changes
  • Board last, unless you have elite status or a co-brand credit card
  • No upgrades
  • Only half credit towards elite status

If American does this they’ll pick up more seat selection revenue, fewer customers will be chased away, but much of the encouragement to buy a more expensive coach fare will be lost. Presumably this test allows American to see which factors are greatest – to see whether Basic Economy is really costing them money as currently conceived.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. United has offered paid seat selection on many (most?) Basic Economy itineraries for months now. I bought seats on a TATL BE itinerary in August…

  2. Actually I think what is going to happen is that elites will wonder why they stick to AA since they are the ones who are being punished by these basic economy fares since they can’t get upgraded. I know for myself as an Exec Plat I get annoyed that I won’t get upgraded on basic economy fares so it’s almost like AA is punishing elites unless they purchase more expensive fares. Way to go to drive away more elites!

  3. I have an incentive to almost never choose American
    When I want the best price & value I almost never chose United or American where I hold lifetime status @ both
    I want an airline that has a good FF program and treats we well as a passenger and customer
    Unfortunately American rarely offers me value, price ,comfort or good customer service
    Basic Economy is simply something I am unlikely to chose
    Southwest I can change my flights or cancel for free as I can on Alaska as a Gold Elite
    So for so many reasons first Dump the AA CEO and then I might consider dropping another 100 k in revenue on American but for all the above reasons
    I’m out

  4. @Gary, the graphic you show makes it clear there are really only 2 choices–BE and First Class. Why on earth would someone choose Main Cabin at $9- MORE than First Class? If they want the Flexibility, then book the BE with a decent seat, and if it needs to be cancelled then no real loss on the ticket price. In this scenario the BE option has become Main Cabin with a reduction in earned points.

    I fly a lot between Latin America and the US and it amazes me how frequently I can find Business Class fares that are cheaper the Main Cabin when factoring in seat selection and baggage fees. Just saying….

  5. I’m sure I’m in the minority but I like Basic Economy as an option. First of all I am lifetime AA Platinum so not worried about getting fewer miles for it, can always check a bag and preboard in my group so not stuck not stuck in group 9. I have seen many cases where a short flight (1-2 hours was $200 or more cheaper w BE). Only real restriction for me is no seat assignment. If short enough flight don’t care if in middle. Otherwise can buy a seat (which qualifies for $200 annual Amex Platinum reimbursement) 7 days in advance. To me if you know what you are doing, have the right status and take advantage of your benefits BE is just like buying an economy ticket but $100-$150 (after paying for the seat assignment) cheaper. No upgrades but that is hit or miss anyway. I have over a million miles still in my account but I can typically find BE fares so cheap it doesn’t make sense to burn miles.

    Too many people just bash it without understanding how it can actually work for you! Granted I wouldn’t fly it on business but for Kwai sure travel it can be made to work just fine.

  6. First off, that’s another click bait headline. AA is not killing off BE. This is simply a slight change to the pick your seat rules.

    I understand what you are saying about AA’s attempt to maximize customer segmentation, but AA has a problem. All the segments still lead to AA flights! So I can spend $30-60 to pick my seat, but no matter what it is still a seat on an AA plane.

    I’d much, much rather pay the extra $60 to buy a seat on a better airline, and I say that even as a guy who carries an AA credit card. Dear AA, how about you spend your time growing a better tomato instead of inventing new ways to slice the rotten tomato you already have?

  7. Just charge extra for window/aisle and be done with it. Having middle/rear of aircraft board last is not exactly efficient.

  8. The key to success in corporate america is to come up with some “innovation” like Basic Economy then leverage that “success” into a promotion or new job. And get the hell out before the sh*t hits the fan! Have seen this countless times. Product management. Inventing new ways to polish a turd.

  9. Until they remove the second carry-on limit is not going to improve the cost part of the equation — super long turnaround times grounding $100m aircraft from making money while passengers self-load and self-unload their baggage, ahem, cargo, while the paid baggage employees sit idle on the ramp waiting for another flight to work on.

    BTW, the headline for this article has to be one of the worse ever.

  10. The reason BE short haul fares are a successful form of revenue is because they can’t be changed. Airlines count on this, as inevitably plans change. The passenger then has to buy another ticket and throw away the BE fare. What a novel idea…

  11. @flygirl said “The reason BE short haul fares are a successful form of revenue is because they can’t be changed. Airlines count on this, as inevitably plans change. The passenger then has to buy another ticket and throw away the BE fare. What a novel idea…”

    Actually if the fare r/t is under $200 this is no different than a regular ticket since there is a $200 change fee which means a ticket less than this amount is essentially something you “throw away” if you need to change it. Also, you can buy travel insurance if you really are worried about that.

    I still contend that, used smartly, a BE fare is great, even for frequent travelers with status. I’m EP (and lifetime Platinum) on AA, live in CLT and frequently see BE fares on the east coast and sometimes to places like New Orleans, DFW, etc for $150-$300 less than a “regular” coach ticket. I can pre-board to find a place for my carry-on due to my status and also check a bag (if I care to do so) so the only issue for me is seat selection. If I don’t care I take whatever is assigned and if I still have airline credit on my Amex Platinum card I use that to get an aisle seat (or even main cabin extra) at no real cost to me. This is about the only way I get value from the Amex Platinum airline credit so am glad to use it.

  12. I booked a flight in basic economy to London flying in June on AA and they allowed you to do this way back then. This isn’t new news? …unless it was a case of this was available (or trialed) on international flights and has now rolled out to domestic?

    Also of interest was as BA silver when I booked through BA it assigned me a window seat in MCE straight away despite basic economy fare. When I booked the same flight to fly in August but via AA.com I couldn’t move unless I paid extra, even at time of check in.

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