American Airlines has finally launched Basic Economy fares on all routes in the continental United States for immediate travel.
American Airlines initially rolled out Basic Economy for sale on February 21 for travel beginning March 1, with some of the initial routes including flights to Canada, Mexico, and Caribbean. At that time it was announced that eventually Basic Economy routes will be rolled out to all domestic routes by the end of September.
This is following the general trend in the industry of unbundling fares due to direct competition with low-cost carriers in domestic markets. Airlines such as Spirit are offering cheap fares with the usual low cost carrier restrictions such as high change fees, no free carry-on bag and more.
Considering that Basic Economy is still a relatively new concept to American and legacy carriers, the airline is putting all efforts forward to make sure both employees and customers are aware of the new fare options.
Employees are receiving training on what the new Basic Economy fare rules allow and customers are now given multiple, clear disclosures throughout the booking process to ensure that they understand what they will and will not be getting with a Basic Economy ticket.
Basic Economy tickets will come with many restrictions. Flight changes won’t be allowed and elite miles will be restricted. Carry-on luggage larger than a personal item is banned, and customers will be among the last to board the plane. Elite customers and customers with AAdvantage credit cards will still receive priority boarding however.
American is dubbing the concept as an opportunity to compete with carriers offering similar products while providing the same Main Cabin on-board experience. The other airlines introducing Basic Economy see it as the same way, as a tool to compete with low-cost carriers.
The Industry’s Response to Low-Cost Carriers
Initially, legacy airlines were matching the price of these low-cost carriers while still providing a full range of offerings with the ticket. For a while, legacy carriers were the better deal to fly on when they matched low-cost carrier rates.
After some reflection and analysis, each of these airlines (American, Delta and United) and are using Basic Economy as a way to compete with low cost carriers. However, at the end of the day, Basic Economy is nothing more than a thinly veiled money grab. In most markets the average trending full service price simply became the Basic Economy price, while regular economy jumped $20 to $40 instantly.
Basic Economy hasn’t been as successful as hoped thus far. During the airline’s last earnings call, United President Scott Kirby said only 30 percent of eligible passengers are booking Basic Economy and that they are not seeing the revenue increases expected, blaming the results on the fact that American hasn’t rolled out Basic Economy yet.
Now that American, United, and Delta have finished their race to the bottom, customers will be faced with Basic Economy fares across the board. But, at the end of the day, we cannot blame the airlines. They are simply following market trends.
The Consumer Push For Basic Economy
Through the rise of low-cost carriers we have seen that most consumers will consider price over all else. They will pick the cheapest option available regardless of how miserable the experience will be. Airlines have learned this and this is why legroom is shrinking, seats are getting narrower, and benefits that were once free now cost money.
This shift in the industry is not being caused by the greed of the airlines, but by the spending habits of the consumer who is always looking for the cheapest possible way to travel, even if it means giving up amenities once considered basic. Ironically, at the end of the day it will be the consumer complaining about the loss of benefits that they caused themselves.
The unbundling movement in the airline industry is not going to be stopped. The concepts are even spreading to premium cabins. At the end of the day, the consumer will get exactly what they pay for, nothing more.
Latest posts by Hemal Gosai (see all)
- Opinion: Airlines are Failing to Properly Utilize Big Data - June 23, 2018
- Rolls Royce Aerospace: The Engine Manufacturer Across the Atlantic - June 21, 2018
- Rising Fuel Costs Crashes the Profitability Party - June 9, 2018