jetBlue Considering Basic Economy, Almost Nowhere Left to Run

Delta was the first major airline to offer ‘Basic Economy’ — highly restrictive fares that initially were offered where the airline competed with ultra low cost carriers. They’d match Spirit’s low fares, but with restrictions. That way customers who were more interested in comforts than price would still pay more.

United copied Delta but with a twist. Their basic economy fares would’t allow customers to bring on a full-sized carry on bag (at least at Spirit you can pay to do so). United rolled out their fares and initially lost about $100 million — because instead of buying up to more expensive fares, and giving United more money, customers chose to book other airlines instead.

They stuck with the plan, though, knowing that American Airlines would continue to play the Greater Fool, giving up their product advantage over United by rolling out the same basic economy fares with similar restrictions.

Customers still had Southwest, Alaska, and jetBlue to choose from. But United’s bet was American following suit would be enough.

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.

  • Basic economy no longer has anything to do with low cost carriers, the major US airlines offer it on routes without low cost carrier competition
  • It’s a strategy to make the product worse, so that customers will spend more to avoid it
  • That makes airlines without basic economy fares a better value at the same price
  • However if it works it’s a price increase, a way to raise fares (to the non-Basic Economy fare) without losing the most price sensitive customers.

Now jetBlue is looking at Basic Economy, too. As reported by Airline Weekly (subscription only) they revealed in a presentation at a Barclays event in Miami that they’re

closely studying the implications of basic economy fares that the Big Three are now offering—no plans to follow suit right now, but it could quickly do so if it deemed worthwhile. JetBlue, meanwhile, emphasized its years of experiencing competing against ultra-LCCs, matching their prices selectively.

That would leave Southwest as the only airline offering greater value at the lowest fares. All Southwest fares continue to be changeable without penalty and they continue to offer checked bags free.

They don’t even need to charge for seat assignments, they netted $358 million last year selling ‘early bird check-in’.

Southwest, fortunately, is the largest carrier of U.S. domestic passengers. They’re not as big an airline as American, Delta, or United but domestically they’re bigger than each of them. And Southwest’s performance suggests that the stock market prefers airlines that treat customers well.

About Gary Leff

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 »

More articles by Gary Leff »

Comments

  1. This is just trying to head off the financial analysts who will say “Airline X gets $y million per year from Basic Economy, why aren’t you offering it?!” I think the execs at jetBlue understand why it is a poor value proposition, especially given that they are generally considered a premium airline. They didn’t head off analyst calls to kill free baggage so they are trying to get in front of this before the beancounters force them to.

    “We’re analyzing it” will become “we looked at it as mentioned in Feb ’18 and we couldn’t see a scenario where revenue from Basic Economy would outweigh the reduced revenue premium we would receive without it”

  2. You realize JetBlue’s cheapest blue fare is pretty much basic economy as is but with everyone having the ability to select a seat, right? And considering JetBlue’s system is limited in what it can actually do, I dont see that changing. Inflight service will also still be the same no matter what JetBlue does fare wise(which it seems to me, they have limited options). You really think B6 will make people go to a ticket counter to be ticketed and regulated over the bag they bring on board? That would mean a complete 180 from their current kiosk based experience preference that they are busy installing in just about all their stations.

    The only thing WN has is free checked bag over a “basic economy” offering. On WN, seating arrangement should actually be like basic economy as there is no seating selection. Just boarding assignments. It’s like a free for all and if you dont check in 24 hours before on the dot, you get screwed. And even if you do check in at that time, you still may get screwed. Hell you even get screwed deoending on your place in line in said boarding position.

  3. There are so many reasons why this wont and cant happen without a huge addition to cost base for jetBlue, a complete 180 from the experience they prefer upon arrival at the airport(which is a lower cost experience to begin with) and a complete 180 from what the airline has been about since its inception.

    Also the fare options they have now, the blue fare is almost like a basic economy esque thing as you must pay for bag.

  4. I fly JetBlue almost exclusively out of Boston because they have a better product and treat frequent flyers well. I hope they are smart enough to stay different and don’t follow the other guys down the rat hole.

  5. You think that Southwest might ever go transatlantic? If they made plans to go international, do you think that they could become the biggest airline in the world? Especially because everyone seems to be devaluing their products.

    I personally (as an aviation non-expert) think they could kill it on some routes. But, that’s just me.

  6. No, WN wouldn’t “kill it” on TATL routes. They’d be competing against the big boys, and the money on those routes is in 1) Biz travel, and 2) cargo, neither of which aligns with their capabilities.

  7. Prior to 5 years ago, I never flew Southwest as didn’t like their loading procedure. Now my preferred domestic airline by far.

  8. Wowser bowser! Even my relatives know you get a free carryon (but not checked bag) on B6. Are they gonna start dragging people off planes too? That would do less damage to their reputation!

  9. I will stop flying them after 40 years.

    That leaves Alaska and Southwest. Full miles and reserved seats with Alaska, free bags and internet with Southwest. Anyone who’s not giving preference to them is throwing away money. Guess it doesn’t matter if it’s the boss’ money.

    They are going to have a real battle over Hawaii though. Fares may be low next year.

  10. Southwest systematically hires friendlier people who like serving customers. Alone in the industry they take the long-term view, avoiding nickel and diming customers. When customers try Southwest a time or two, they realize the difference and come back to where they are treated right. This takes years to happen rather than showing up on the next quarter’s earnings.

    For example, many people still have not flown Southwest since 2007, when it changed to online check-in to replace the plastic boarding cards handed out at the gate. Those people are in for a pleasant surprise. They will likely return to Southwest once they realize how favorably it compares to today’s competition as they race each other to the bottom.

  11. I love SW. However, it sucks when you’re on a nonstop flight that is a common connection. So even though you check in exactly 24 hours in advance you can end up in C.

  12. @BR “JetBlue’s cheapest blue fare is pretty much basic economy ”

    Not even close. All B6 “Blue” tickets permit seat assignments, carryons, changes, and elite/reward accrual. The only “difference” to regular econ is the elimination of the free checked bag and that’s actually identical to legacy carriers’ regular econ fares.

  13. +1 @Mike
    I actively choose Jetblue from Boston and Long Beach because they treat people better, have a superior in-flight product, and I have positive associations with the brand. They should really think twice about dinging loyalty/customer experience. So many passengers board and are impressed. Been Mosaic for years (from actually flying) and love it.

Leave a Reply

Your email address will not be published. Required fields are marked *