Search Results for "basic economy".
A roundup of the most important stories of the day. I keep you up to date on the most interesting writings I find on other sites – the latest news and tips.
American Airlines used to believe that ‘basic economy’ would be worth a billion dollars to the airline.
We keep hearing that basic economy is a success. American now concedes that despite those proclamations that it has ‘underperformed’.
Everyone believes basic economy works because airline executives keep repeating that it’s true. It was supposed to be a billion dollar idea and yet once implemented the revenue benefits don’t clearly materialize in the financials.
We keep hearing things like 50% of customers buy up to a higher fare, which strikes me as like “73.6% of all statistics are made up.”
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.
American Airlines Basic Economy fares are highly restrictive. The purpose of these fares is to make the travel experience worse, in hopes that you will spend more money to avoid them. However they need to balance that with the risk that you will just give up on them and choose to fly someone else instead.
American Airlines President Robert Isom, speaking at the Cowen and Company Global Transportation Conference, admits that “the premise of basic economy, it wasn’t a price cut…[but] an upsell.”
It’s difficult to see how United can stand alone, though, with the most draconian restrictions among the largest US airlines. With Delta’s claim that American and United basic economy were driving revenue to them, and with American abandoning their own carry on restriction, it’s just a matter of time before United must react.
On July 3rd I shared that American was poised to relax the most draconian restriction on their lowest-price Basic Economy fares, once again allowing customers on these lowest fares to bring both a personal item and a full sized carry on bag onto the plane. American refused to comment.
However this change has now been announced in this morning’s earnings release, and points to the failure of the business strategy of making your product worse in hopes of generating more revenue.
During yesterday’s second quarter earnings call, Duane Pfennigwerth of Evercore ISI asked whether the way “the rest of the industry has implemented basic economy so far… the more punitive implementations of it, no carry-on” has led to “positive share gain” (people choosing to fly Delta instead of United and American).
American is expected to relax the most draconian restriction on their lowest-price Basic Economy fares, and that points to the failure of the overall basic economy strategy. Perhaps as early as next month they will once again allow customers on these lowest fares to bring both a personal item and a full sized carry on bag onto the plane.
A roundup of the most important stories of the day. I keep you up to date on the most interesting writings I find on other sites – the latest news and tips.
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 »
