Basic economy is an attempt by the major airlines to raise revenue by offering a worse product.
- Basic economy fares generally do not allow seat assignments at the time of booking, so customers may get stuck with ‘what’s left’ like a middle seat in the back by the lavatory.
- They can’t be changed, so if you buy a ticket and plans changed instead of a change fee you forfeit the whole fare.
- Board last which if you’re on Delta, American or Alaska with a carry on bag you may get stuck gate checking it when they run out of room.
- In the case of United, their fares are the worst, you aren’t even permitted to bring a full sized carry on bag on board.
The notion here is that the cheapest fares get called basic economy, and you have to spend more to avoid those restrictions. It’s a price increase that applies to customers that are willing to pay more to avoid the least comfortable travel an airline offers.
Originally these fares were conceived of as a way to compete against ultra low cost carriers. If Spirit was going to charge $49 one way, and American felt they needed to match the fare to avoid losing the business, then gosh darnit they were going to make sure the product customers got wasn’t better than Spirit’s.
Initially of course the thinking was mainline airline products would still be better with more room and the ability to put customers on other airlines when things went wrong. However American has been squeezing more seats into planes and their policy is not to put coach passengers on other airlines when things go wrong unless those passengers have elite status.
Meanwhile Spirit has plans to add inflight internet, and even participates in PreCheck now. The difference between the ultra low cost carriers and majors has been shrinking.
Basic economy isn’t deployed only against low cost carriers though, it’s in most markets and has gone international too, because it’s about a price increase and not just a competitive tool.
And though it’s often thought of as about an extra $20 each way that’s often not the case. When you see $400 buy ups to avoid basic economy that isn’t a mistake.
Instead it’s how airlines are re-asserting pricing power over business travelers. Many companies won’t show managed travelers basic economy fares. So airlines can offer cheap tickets to compete on price, while still showing only high prices to corporate customers.
Advance purchase and Saturday stay requirements used to separate business and leisure travelers, so that leisure customers buy cheap fares and business customers more expensive tickets. Those tools are mostly gone, and have been replaced by basic economy.
As long as businesses go along, the strategy works, even though it means that buy up for leisure travelers to get a seat assignment or be eligible for an elite upgrade can be prohibitive.
At the same time, sometimes airlines simply push things to far — such as American Airlines over the holidays. A reader shared the trip they were trying to book, London – Denver – Rome, and buying an advance seat assignment cost more than an extra $1000.
There’s a certain extent to which the strategy is understandable, American wants to charge business travelers more for the seat than leisure travelers. But there they make two mistakes.
- Thanksgiving and Christmas travel there simply are no business travelers
- Instead of picking up the $1000 from this customer, he went and booked an award ticket instead.
The cardinal rule of frequent flyer programs is that saver awards aren’t supposed to displace paying customers. Except airlines only think in terms of their own saver inventory. Here he used miles to fly Lufthansa business class instead of American coach. American’s overreach pushed this Executive Platinum customer to redeem miles and fly another airline instead.
United lost about $100 million rolling out basic economy, because American didn’t yet offer the restrictive fares so customers were choosing not to fly United. American got rid of their carry on restrictions from basic economy, because customers who wanted to bring carry on bags were choosing to buy tickets from Delta instead.
There’s a delicate balance here as airlines try to be all things to all customers, simultaneously offer the worst possible product they can as well as something that isn’t as bad for more money. Their ‘business versus leisure traveler’ models aren’t as simple as they sometimes believe. Business travelers are leisure travelers and telling their 100,000 mile business customers that they cannot fly the airline for the holidays is another recipe for chasing those customers away.