American Airlines has improved its basic economy fares. And I already like their version of basic economy better than other airlines. As a frequent American Airlines flyer, I can still assign extra legroom seats and I’m even eligible for upgrades.

What’s new is that basic economy fares are no longer ‘use it or lose it’ on international trips.

• Domestic itineraries have been cancellable for credit, deducting a $99 fee.
  
• American Airlines international basic economy fares can now be cancelled for partial credit, too.

Short-haul international basic economy tickets originating in the U.S. are now cancellable for $129 fee and long haul international basic economy tickets originating in the U.S. are now cancellable for a $199 fee. An AAdvantage number must be in the reservation prior to cancelling.

How Airlines Use Basic Economy

Airlines used to use Saturday night stay and advance purchase requirements to separate price-sensitive leisure customers from higher fare business customers.

They want to fill up their planes, because a seat that takes off empty can never be sold again. They’re willing to take almost any amount to put an extra passenger in a seat that would fly empty, because nearly all of the costs of flying that plane are fixed (e.g. the plane itself, crew, fuel). However they don’t want to discount in a way that lets passengers willing to spend full price get that seat for less.

In the movie Wall Street, Charlie Sheen explained it in the first point of his three-point plan for turning around Bluestar Airlines,

We squeeze every dollar out of each mile flown. Don’t sell a seat to a guy for 79 bucks when he’s willing to pay 379. Effective inventory management will increase our load factor by 5-20%. That translates to approximately $50-200 million in revenues. The point being, we can beat the majors at a price war.

Advance purchase and Saturday stay requirements don’t work anymore to offer low fares to clear price-sensitive customers while charging full freight to everyone else. Low cost carriers didn’t impose those restrictions and eventually they fell away from the majors too.

Basic economy became the new advance purchase restriction on the lowest fares, making the travel experience worse. Business customers, and those willing to pay not to have a worse experience, don’t buy basic economy. The airline charges them full freight. But they can increase the number of seats they sell with heavy restrictions to compete for the most price-sensitive business (and draw that business away from Spirit Airlines and Frontier).

Each Airline’s Basic Economy Is Different

United Airlines is the most punitive. Their basic economy customers aren’t allowed to bring a standard carry-on bag on board. That forces these customers to check bags more often, which has its own fee. What’s more, they require a $65 credit card pre-authorization before basic economy passengers are permitted to check-in online.

JetBlue used to have the carry-on bag restriction, but dropped it last year, although the airline’s least expensive frequent flyer awards now carry basic economy rules, like with Delta.

Delta, for its part, doesn’t even allow members of their Sky Clubs to access those lounges when traveling on basic economy fares, and the tickets do not earn any miles or credit towards elite status. They even warn that seats, which don’t get assigned until check-in, won’t be together for passengers traveling together.

As I predicted last year, Southwest Airlines is adding basic economy restrictions to their cheapest tickets.

Comparing Options Is Tough

There’s a lot of nuance to the different product features each airline supports with their lowest fares. Figuring out what you’re going to get is more than just looking at the schedule and price.

Of course that’s been true for a long time. Delta and JetBlue offer free wifi. United is installing fast Starlink internet, which will be free. American Airlines will make wifi on most of their planes free next year. Southwest’s wifi is the worst-performing, while Frontier doesn’t offer it at all. Frontier’s seats are probably the hardest and least comfortable.

In other words, airline seats are like most products – no longer a commodity, even at the cheapest price.