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Just as they said to expect in January Alaska Airlines announced on their earnings call this morning that they will introduce Basic Economy fares in late fall.
On flights where some passengers have to gate check bags it won’t be those who pay extra to board early and queue up in group two. It will be those who don’t pay the $9.
American its transatlantic joint venture partners announced that they are rolling out Basic Economy fares across the Pond, following the lead of Delta and its partners.
File this under completely expected, but another degradation in the travel experience that offers less value to customers at the same price.
It’s a tough industry to stand alone in, and pressure from financial analysts is fierce. Alaska, completing its merger with Virgin America, now says they’re considering Basic Economy too.
Now jetBlue is looking at Basic Economy, too. As reported by Airline Weekly they revealed in a presentation at a Barclays event in Miami.
Air Canada has introduced ‘basic economy’ fares on domestic flights within Canada.
The goal remains to discourage customers from buying the cheapest fares in hopes they pay more to avoid these restrictions — while not taking their business elsewhere to another carrier.
During United’s earnings call last month they explained they would be tweaking Basic Economy fares.
The idea of Basic Economy is to offer such a bad experience that you’ll spend more money to avoid it. However when United first rolled out the fares they lost about $100 million — because customers were avoiding United.
Basic economy isn’t supposed to be a new cheaper fare. It’s supposed to be new restrictions on what used to be the cheapest fare. That way people who don’t like the restrictions are supposed to spend more money to avoid the inferior experience.
But American offered me such a spread between Basic Economy and regular coach fares that I couldn’t justify spending more money, and I wound up flying Basic for the first time.
I’ve gotten asked increasingly frequently lately 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 and American’s case no full-sized carry on bag) how soon until saver awards book into Basic Economy?
Mergers create a brief window where customers are largely protected from devaluations. Airlines are distracted by merger integration, and don’t want to make customers feel like the merger will be bad for them right away. Once American Airlines moved to a single reservation system in October 2015 we learned about a gutting of AAdvantage the next month both for elite status qualification and benefits and for their redemption chart, and then the rollout of basic economy the next year.
Alaska Airlines right now has by far the most lucrative US airline frequent flyer program. Their award chart is far more attractive than that of their competitors. And they’re a better airline to fly. That may change.
The point of ‘Basic Economy’ fares — which don’t let you assign seats in advance, upgrade, or make changes for a fee, and at United and American don’t allow you to bring a full-sized carry on onto the plane — is to make the travel experience so unpleasant you don’t want the fare, and will spend more to avoid the restrictions.
The risk is that customers don’t spend more with the airline offering the inferior Basic Economy product, but instead book a different airline instead (or even just decide not to travel). That’s what happened when United launched their basic economy product. They lost business. And they lost about a hundred million dollars.
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 »
