Kerry Philipovitch, American’s Senior Vice President of Customer Experience defends the idea of Basic Economy fares in the latest “Tell Me Why” podcast aimed at the airline’s employees.
She says that without Basic Economy “we’re going to see our most price sensitive travelers leave us” — as though stripped down fares are necessary to offer low fares, and even though immediately after she explains that American had been offering fares that match ultra low cost carriers before Basic Economy.
Philipovitch describes Basic Economy as a way to “level the playing field” because low cost carriers were upselling customers after selling them tickets, while American had been including their services with the ticket. She says these fares that don’t allow customers to select seat assignments when they book their tickets, don’t allow customers to make changes even for a fee, and don’t allow customers to bring full-sized carry on bags onboard as “a win win.”
American Offers Paid Seats for Basic Economy 48 Hours to Departure
Her complaint is that before Basic Economy American offered a better product at the same price. Which is always what I thought the goal was supposed to be in business.
Of course contra her explanation American is not just offering Basic Economy fares in markets where they compete against ultra low cost carriers like Spirit Airlines or Frontier. They’re offering it on most domestic routes and flights.
Basic Economy is a price increase that targets customers willing to pay more to buy out of a subpar experience including managed business travelers who aren’t presented Basic Economy fares.
It’s also a way to devaluing the American Airlines brand. It’s a way of ensuring American Airlines no longer means a full service travel experience. And it’s a way of telling frontline employees that the goal isn’t providing a top tier product to every customer every day.
United initially lost $100 million in their roll out of Basic Economy as customers chose other airlines with better products at the same price. So they doubled down on their bet, knowing American would follow them. Perhaps both airlines will generate incremental revenue from basic economy, accounting games notwithstanding. But there’s a real cost that won’t be captured in those numbers as well, the reputational hit they take with premium customers.
Listen to the full discussion: