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.