Andrew Sheivachman of Skift writes that a survey of large corporate travel buyers and managers report 63% of travel policies “ban basic economy bookings completely, while just 13% allow them.”
And the way basic economy was first laid out that makes sense, “the consensus is that travelers end up paying more over the course of a trip if they go basic economy and have a worse flight experience to boot.”
Corporate travelers can often expense the extras anyway like seat assignments, checked bags, wifi, and inflight meals. It doesn’t make sense to save $20 on the fare and give it back for a seat assignment, and have a worse overall experience too.
And when the difference between basic economy and regular economy is just $20 that’s unquestionably right. But airlines have taken that knowledge, that business travel booking engines will filter out basic economy options, and used it as ‘the new Saturday night stay’ — the means to differentiate pricing for leisure travelers and business travelers.
Here one way economy was more than a $400 buy up from basic economy.
Here it’s more than a $200 difference.
These aren’t errors and it isn’t pricing departments gone mad. Of course a leisure customer is going to choose the basic economy fare, at least most of them will, and they might very well have been willing to spend an extra $20 or $25 to avoid the restrictions. But that misses the point.
Airlines are trying to regain the ability to sell tickets more expensively to price insensitive business travelers while also selling tickets cheaply to price-sensitive leisure travelers. They used to do this through fare restrictions such as:
- Advance purchase requirements (7, 14, 21 day)
- Saturday night stay requirements
They can’t do this anymore is many markets. Prices are now frequently one way, a roundtrip isn’t necessary to get the lowest fares (which makes requiring a Saturday night stay impossible, business travelers fly out Monday and back Thursday or Friday while vacationers spend the weekend). And the ultra low cost carriers offer cheap prices even on the day of departure, so to compete airlines haven’t been able to offer cheap fares booked far in advance while charging more to last minute business customers.
Basic economy is a price increase, airlines:
- charge more for the same product (regular economy)
- make their base product so bad that many customers will spend more to avoid it
But it’s also a way of regaining control of their price discrimination stategies, the way they charge massively different amounts based on willingness to pay.
And by refusing to show basic economy fares no matter what the price difference businesses have capitulated to airline attempts to do just that.