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.
Their bet was that once American rolled out their restrictive Basic Economy fares too the ability for customers to ‘book away’ would end (American would be giving up their competitive advantage). Of course Southwest Airlines doesn’t offer Basic Economy, and Southwest carries more domestic passengers than anyone else.
United also realized that customers who do buy Basic Economy might be willing to spend money, and United doesn’t want to leave that money on the table so they said they’d start selling seat assignments and upgrades to these customers.
That’s now gone into effect. United will sell customers on basic economy fares a seat any time from ticket purchase up to the check-in window 24 hours before departure. In addition tomorrow (Friday) they begin selling wifi subscriptions. Here’s the internal policy update:
As an elite frequent flyer or a co-brand credit card customer the biggest thing thing you give up on a Basic Economy fare is a seat assignment (and shot at an upgrade). Now it’s just math, if there’s a big difference between basic and regular economy like there was for me coming back from Phoenix last weekend, you buy basic economy and the seat.
Meanwhile wireless internet subscriptions are important not just as recurring revenue but because they help lock a customer into the carrier. If they’re prepaid for their wifi via a subcription then flying another airline is more expensive even when price is the same.
As an American Airlines monthly internet subscriber I know that if American and Delta are charging the same price, the Delta flight will be $10 or $20 more expensive because I’ll still need to buy inflight internet while I don’t on American.