Basic economy tickets aren’t a ‘new way to offer cheaper fares’. They are new restrictions on the cheapest fares, a way of making the product worse so that some passengers will pay more.
Now that United, Delta, and American all offer Basic Economy fares (no advance seat assignment, no cancel/changes, no upgrades or extra legroom seats, and in United’s case no full-sized carry on bag) it’s only been a matter of time before one of the carriers tried booking award tickets into Basic Economy.
I admit to being surprised that it’s happened so quickly, since it’s not in the best interests of the airline – it’s a bad business decision – but I’m not surprised that it appears to be Delta going first.
- Delta was the first carrier to introduce basic economy fares
- Delta is the airline that comes closest to viewing miles as just another currency or way of paying for whatever ticket is available
- Delta is the most innovative US airline these days, both for better and for worse – they’re the one United and American are usually copying
- They don’t publish an award chart anymore anyway — their award prices are whatever they say they are for a given flight
By the way this isn’t even limited to ‘saver’ awards. A traditional saver award was 12,500 miles each way domestically. Here they’re asking members to spend 35,000 miles for a flight and still not have a seat assignment. American Express has to be furious with this since it strikes at the heart of the value of their biggest co-brand portfolio.
Based on limited sampling so far this applies only on a limited number of routes and the ‘buy up’ to avoid basic economy seems to be an extra 2500 points each way.
Delta’s CEO thinks of miles as just another currency to use to pay for stuff. He views their miles as worth a penny apiece. You spend miles or money to buy up for better travel experiences.
You’d think then that since Basic Economy fares are the cheapest, the cheapest mileage redemptions would be for basic economy. If you want better travel experiences, spend more miles. This is a way to get customers to burn more miles for their travel.
Still, this actually doesn’t make sense for an airline to pursue. Award travel is the reward for loyalty. After members redeem miles on average their rate of accumulation rises. Airlines make big margins selling and redeeming miles. Give members a bad basic economy experience they are less likely to value the redemption. Accumulation slows and the airline loses mileage sales and profits.
What’s more an airline does not need to make the cheapest redemptions book as basic economy tickets. If they want to make their miles worth less, and get customers to ‘buy up’ or spend more miles for travel, they have other levers to use. These are proprietary currencies. They manage availability and set the price and consumers can’t take their miles and go elsewhere.
Airlines don’t want to sell Basic Economy tickets they want customers to buy up from basic economy. Basic economy is a form of price increase (on those with the greatest willingness to pay). But airlines raise the price of awards all the time, indeed Delta shows they have no problem devaluing their miles every few months and thus don’t need basic economy to implement a price increase.
I’ve reached out to Delta for comment and will update with additional information as I have it.
Update: Delta has provided the following statement about this change-without-notice:
Our customers have told us they want the flexibility to use their SkyMiles on more types of Delta products, and we are always looking at new ways to expand those options, while making that process simple and intuitive for them. As a part of this effort, we are testing the ability for customers to use miles for Basic Economy tickets on select flights.
(HT: One Mile at a Time)