Report: American Bringing Back Carry On Bags to Basic Economy, Underscores Failure of Basic Economy

American is expected to relax the most draconian restriction on their lowest-price Basic Economy fares, and that points to the failure of the overall basic economy strategy. Perhaps as early as next month they will once again allow customers on these lowest fares to bring both a personal item and a full sized carry on bag onto the plane.

When Scott Kirby was President of American Airlines they developed a ‘basic economy’ product — an attempt to make flying unpleasant enough that customers would spend more to avoid it — by taking Delta’s basic economy restrictions (no ticket changes, no upgrades, no advance seat assignments) a step further: no full-sized carry on bags.

Customers would have to check their bags, and of course American charges for that too. Elites and co-brand credit card customers would be exempt from this new restriction.

United was prepared to roll out their own Basic Economy product but delayed once Scott Kirby came on board as their President — adding the carry on bag restriction to their own Basic Economy product.


United Boarding in San Francisco

In fact United rolled out their Basic Economy first. They promoted new lower fares but the truth was these were just restrictions on their lowest fares. Although basic economy was once promoted as a billion dollar idea, United lost about $100 million on the roll out of basic economy because customers were just choosing to fly other airlines instead.

United stuck with their plan, figuring that once American introduced their basic economy fares customers would have nowhere else to run. Nevermind that Southwest is actually the largest domestic airine, Southwest doesn’t even charge for (2) checked bags and doesn’t have change fees on their tickets. American’s CEO calls Southwest a cattle car but flying American’s basic coach product is worse.


Southwest Airlines Cabin

I’ve contended from the beginning that you don’t make money over time by making your product worse. A successful business, not protected from competition by government the way US airlines are, works to deliver more value at lower prices. However the bet here was,

  • Airlines could get business travelers to pay more. Their employers are footing the bill and they won’t book basic economy.

  • This would function as a targeted price increase, allowing them to raise fares on people who care about their travel experience while still competing for the business of leisure travelers who might be siphoned off by Spirit Airlines and Frontier.


American Airlines Economy

Increasingly there’s little difference between Spirit, Frontier, United, and American at the lowest fare. In fact Spirit Airlines is adding internet, and American Airlines is taking away seat back entertainment and reducing the distance between seats.

In a sign that Basic Economy really has gone too far, American Airlines will reportedly be relaxing their Basic Economy restrictions. They won’t comment on this officially, but I’ve done some asking around and it appears highly credible.

American is going to start allowing full size carry on bags again on these fares.

  • The reason for the change may not be customers booking away from American Airlines

  • Basic economy customers with carry on bags at the gate delays departures. Nothing is more important at American than ‘D0’ it often seems as if American would be happy if they could eliminate customers from the equation and just run their operation they’d be happy.

  • But if they’re sacrificing basic economy restrictions for D0 – departures exactly on time – that suggests the financial benefit of those restrictions just cannot be that much. The potential delays aren’t worth taking because the financial upside isn’t great enough. They’ve decided that padding the schedule to accommodate basic economy restrictions isn’t worth it, and we can infer the relative value of those restrictions from that decision.

Once full sized carry on bags return to American’s basic economy fares there’s really not too much difference between regular economy and Basic Economy to the non-elite frequent flyer. Most customers have to pay for decent seat assignments in coach, American’s Basic Economy fares mean you wait until 48 hours prior to departure to have access to paid seats. Of course close to departure, as upgrades clear for elite frequent flyers, can be the time the best seats open up in back.

American certainly isn’t going to admit their approach to Basic Economy is a failure. However if it was a success they wouldn’t be making it less draconian. Nonetheless they should be applauded for learning from their mistakes even if they cannot publicly admit it. Alaska Airlines needs to pay attention before they add their own version of basic economy.

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 »

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Comments

  1. Overhead bin space needs to be rationed in some way. The previous system of a “bin lottery” via zone numbers was too arbitrary for non-elites and left a revenue opportunity go to waste for the airline.

    Say what you will about basic economy, but it at least attempted to ration bin space using good ol’ capitalism.

  2. “Their employers are footing the bill and they won’t book basic economy.”

    Except this hasn’t been the case from a technology perspective. TMCs have been beside themselves because of basic economy fares flooding their booking tools, and most domestic corporate policies require booking the LOWEST fare within a small window. Our company’s tool still isn’t filtering out basic economy yet, and we end up having to call the TMC to book manually as a result, because on business travelers won’t put up with the BE garbage restrictions. It’s been a huge hassle to deal with since this was rolled out by the airlines.

  3. Who would have anticipated that the confusion of requiring Group 9 travelers to pay at the gate for their carry-on could have resulted in delays? Oh, wait… totally foreseeable.

  4. These are the analysis-type articles that your so good at – I wish you’d stick to them 🙂

  5. Gary,

    As usual, your analysis ignores Delta’s apparent success with Basic Economy. Why was Delta able to figure it out while others failed?

  6. @Anthony –

    1) Delta never placed a carry on restriction on basic economy to begin with.

    2) Delta has maintained that basic economy is only a minor role player in their overall strategy, they’ve thrown shade at the grandiose claims Scott Kirby made as President of American and then United about its revenue potential. They’ve talked about numbers like $80 million [domestic] not anything like $1 billion.

  7. Gary,

    Thanks for the reply. Really enjoy the blog and I’m learning a lot from it

    – Anthony

  8. There is one reason American changed this policy – Parker is a very stable genius.

    BTW – I read on another blog he made the decision to change the policy while sitting in a new 737 lav.

  9. Basic Economy restrictions helps much during the boarding process because of the limited space in the overhead bin. It helps that these customers were the last to board and we expect that they don’t carry on luggage therefore much easier to dispatch the plane on time. I don’t understand when someone says it will delay the flight. If they’re the last to board and no carry on bags, why would the plane be delayed ???

  10. NOTE:

    Development in no way underscores the failure of basic economy.

    It underscores the failure of AA’s D0 obsession.

  11. BE always brings luggage that is oversized beyond allowed under seat stowage. First they gripe about cost of luggage at ticket counter, ignore that additional cost and continue to gate and create a scene st gate. Ultimately costing the delay to remedy the issue, paying for the luggage.( clearly stated on printed ticket and reminded at ticket counter!

  12. Pat Francis Yoy Get It where the cheap self entitled People Do Not. I have seen Plenty try to zscam the System….. if You Do not like the stipulations, stay Away from The Crap Fare Cluck. period

  13. AA has eroded its brand substantially. I am a multi million miler and longtime Exec Plat who is in the process of saying “buh bye” to AA. Recent comparisons to other airlines on US routes leaves AA now reduced to the level of the old USAir. And still dropping. Very sad.

  14. So just as people are adjusting to “under-seat-only” luggage, AA is going to change back?

    The key issue is are they going to keep the same BE fares with this change. Right now DC-MIA they are way under half of economy. IF they change, I bet they change the fares too.

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