During the pandemic the demographics of airline travelers have been shifted.
- They’re leisure travelers. Business travel has been almost non-existent.
- They are infrequent travelers. The percentage of passengers who are members of an airline’s loyalty program have been much lower than usual.
- They are younger. Younger people are less concerned with Covid-19 overall, stemming from lower personal risk.
As a result it’s no surprise that American Airlines Senior Vice President Vasu Raja reports that a ‘vast majority’ of the airline’s customers who purchased Basic Economy fares in recent months have been under 30 years old, and two thirds of those aren’t AAdvantage members.
He suggests anticipating using Basic Economy “as a means of getting customers who really weren’t travelers before to come to market, as an entry product into the airline, to the travel experience.”
Raja may have the causality here backwards though. Young infrequent price-sensitive travelers buy the cheapest fares. They aren’t attracted to Basic Economy they are attracted to low fares. The notion that Basic Economy is somehow going to allow American to sell to a ‘younger demographic’ is a strange one, especially since these fares aren’t lower than what the airline used to offer.
Nonetheless the basic strategy is consistent with Raja’s internal claim that they’re re-orienting themselves away from being a business travel airline since the customers buying travel today aren’t business travelers. Long run though ‘high cost, low revenue, high debt’ isn’t a winning strategy it may just be the best they can do right now.
Ultimately basic economy isn’t how American and other airlines will attract more of the travelers that are out there – it is how they will give those travelers less than they used to, in order to charge more money to people that aren’t as price sensitive.
So they want to turn american into another spirit airlines full of college kids with covid that will accept a sub-par experience as long as the price is discounted? If that is their target audience I’ll fly on a competitor thanks.
Catering to customers who choose exclusively on price is a terrible business model unless you are by design a low-cost carrier. Raja apparently thinks that these customers will stick with the airline, when all evidence would indicate they will flock to whomever is offering the best price at any given moment. With the high legacy costs AA carries, they are simply unable to compete long term in the budget airline space.
However, given recent moves by AA to remove as many members of their loyalty program as possible, it is possible that AA is indeed aiming to compete with Spirit rather than Delta. The pandemic might just have given them the cover they need to become a budget carrier.
I like the pic of that young, infrequent flyer!
My experience with Basic Economy travelers on AA is they buy the cheapest BE ticket – then when the doors close they self move up to a middle seat in the exit row with no implication. At least UA doesn’t allow it.
Infrequent travelers are not concerned about FF miles – because they don’t earn enough with $ based earnings to be worth it and they are not going to make Elite status anyway. Low price is king.
Young travels don’t get $500 Credit cards for lounge access and mileage benefits and aren’t going to spend to earn miles.
AA should be adding more F seats – since many traveling now will buy F to avoid setting next to someone in the middle seat.
Business travel will be permanently down – as employers limit.
AA should be going after their current FF base – adding and selling more F seats.
Interesting to see how airlines are doing to deal with things now that they cant milk OPM flyers.
I wonder who will blink first in lowering the qualification bar in 2021.
Hopefully OPM flyers have to stay home for a long time, so that the airlines have to adopt more customer friendly policies.
AA HAS THE YOUNGEST FLEET.
AA HAS BEAUTIFUL ADMIRALS CLUBS.
AA HAS GREAT HUBS.
AA GETS ME WHERE I WANT TO GO.
STOP BASHING AA.
GO FLY DELTA’S OLD 757,767.
ATL,JFK. DEAD!
JUST SAYING.
What’s going on with the thumbnail picture… Who is that “young, infrequent flyer.” Also, your hate for AA confuses professional flyers.
It’s funny. I guarantee an empty middle seat by buying my flights on SWA.
After 20 yrs of Explat, I’ve dumped AA like a hot rock. good riddance
SWA knows how to both run a business and treat loyal customers well.
Let me show them the money.
Actually Gary, recent BE fares are lower than any American fare last year. I have to flown to DCA for $96RT, DTW $185RT, and PSP $680(F)RT. Great deals. JJ Buffalo
Is that George Costanza?
I’m still flying for business purposes & I fly American exclusively. I’ve been on several nearly full flights recently and there is no shortage of middle-aged people traveling alone. This site & others like it seem to define business travel only as long haul coast to coast or overseas flights made by executives. But there are still plenty of businesses buying last minute tickets for guys with tool boxes that need to fix a machine somewhere. Any company that still makes anything in the US is still open, and still needs their account serviced. And anyone in the food or consumer goods business is probably traveling more than usual to keep supply chains moving. Yes, I see more work boots than suit coats in the premium cabin these days, but I think it’s a mistake to say AA is putting all its eggs in the leisure travel basket. Heck, I still remember one of my marketing professors enlightening us 30-odd years ago that the first rule of advertising is “fish where the fish are biting.” So since flights from LA to Shanghai are basically out of the question right now, it’s no surprise they are focusing on routes (and tickets) they can sell.
@John Luffred — fair point about the clubs, they are behind the competition but still better than the public terminal so I will give you that. But AA having the youngest fleet is actually a weakness, even though you seem to champion it as a strength. Generally speaking, younger fleets have higher passenger density and less comfortable seating. Smaller lavatories too. Often no personal IFE.
AA’s main hubs are in low tier cities. One can live a full life without ever visiting Miami, Philly, even Dallas. Hard to argue the same about New York JFK.
American Airlines, “the stainless steel business travelers’ airline”, would have to gut its fixed and variable costs to make money at ‘low fares’. Long time employee trust and motivation would deteriorate even further. ‘Company culture’ would be an even greater competitive disadvantage. Was the AA Board asleep or complicit when someone put Tom Horton’s Raja Vasu in charge?
Young, infrequent flyers can become well-paying frequent flyers. Until the airline again has a frequent flyer program that rewards even young, infrequent flyers on cheap tickets, the idea of attracting such “young, infrequent flyers” now and retaining them on a basis other than price just won’t fly as long as there is reasonable competition in the marketplace seeking the business.