Delta Eliminates Upgrades On Basic Economy Fares

There’s no doubt airlines are in a race to the bottom when it comes to “unbundling” their fares. Airlines think they’re being smart with the way they market unbundling — “pay only for the services you use.” The problem is that in most cases they continue to charge the same for the “unbundled” fare, and then add fees on top of that for services that used to be free.

As far as legacy US airlines go, Delta took unbundling to a new level in 2012 when they introduced Basic Economy fares. These fares are even more restrictive than normal non-refundable economy fares in the sense that they don’t allow advance seat assignments or changes. However, at the time they were still eligible for upgrades and mileage accrual.

It looks like Delta will be decreasing the benefits on Basic Economy fares in 2015. As of February 1, 2015, Delta Basic Economy fares (booked in the “E” fare class) will no longer be eligible for paid or complimentary upgrades, same-day travel changes, or priority boarding for purchase:

Delta-Basic-Economy-Fares

Why Delta’s change doesn’t matter much in practice

It kind of surprises me, but these fares haven’t really spread much at Delta since they were introduced in 2012. They’re still limited to only a few markets, so chances are most of us have never booked (or even been offered) a Basic Economy fare.

Yes, certainly some people have so it impacts them, but for the most part I don’t think the practical implications are huge… yet.

Why we should worry about Delta’s changes

The big issue here is the precedent this sets, and what I think Delta is trying to accomplish with these changes.

Delta is a big airline with big ideas. As I always say, I respect them a ton as an airline. The reason they’re so often able to tell their customers to go pound sand is because of what a solid airline they run operationally — they don’t need to incentivize people to get on their planes. They’ve lead just about all the negative innovation we’ve seen with US frequent flyer programs over the years, from revenue requirements to awarding redeemable miles based on spend.

And they’ve done it simply because they can.

Delta is generally a “big picture” airline, so I think this is part of their grander plan. I have to imagine so far they’ve just been playing with Basic Economy fares to see how consumers react, but I think the fact that they’re removing benefits from these fares suggests they’re ready to expand them, and perhaps long term make them the new “standard” discounted economy fare.

Delta

Bottom line

In practice I doubt these changes impact many, given how limited these types of fares are. However, if my read on Delta is correct, this has the potential to have long lasting effects, both for Delta flyers and passengers of other carriers (after they match the changes).

How do you view these changes? Should we take them at face value and assume Delta will continue to only offer Basic Economy fares in a select number of markets, or do you think they have bigger plans?

Comments

  1. No question, this would suggest that “E” fares are ready to be rolled out to more than the small number of markets where they currently appear, which doesn’t really bother me. If the label “basic economy” and associated restrictions starts creeping up the ladder to other discounted economy fare buckets, that would be unfortunate…but it also seems likely.

    I would argue Delta isn’t even necessarily leading the charge here; European majors have been tinkering with this kind of thing for a while — Air France’s “Mini” fares are similar to this, for example.

  2. lucky,

    If they have grander plans, then the villagers need to storm the castle and bring the (And**son) monster to a reckoning in the town square!

  3. I found it darkly hilarious that they would even include “Seat Recline” in the comparison of “Product Features”.

    So will they eventually monetize (a) the ability for a passenger to recline or (b) the ability for a passenger to prevent the person in front of them from reclining (e.g., rent Knee Defenders to “standard” fares). 😀

  4. @jmd001, they will monetize it for sure. They’ll just be following the lead of “Air Canada Rouge” where the seat pitch is 29″, the entertainment is all pay per view, the baggage allowance is generous (at zero bags), and the prices are full service.

  5. It is amazing how fast domestic air travel is becoming a race to the bottom. How long until we get European-style first class (AKA economy) on domestic fleets? I’m sure Doug Parker has already looked at the numbers….

  6. Not to worry, this is just a test case in a few markets. When they add it to T fares, it will still not be a cause for concern. Then when they expand to LU, still not a cause for concern!

    Wait until you see enchanced SM 2016!

    Biz flyers sit on all the tastiest ham sandwiches, so you can forget upgrades unless you are on an upper fare class in a few years.

    I think about 80% of US markets are now effectively a duopoly cartel, if not outright monopoly.

  7. Its basically their way to compete with the ultra low cost carriers. They are trying to segment the market and offer cheaper fares to a type of customer that only buys rock bottom prices. But they don’t want those sales to eat into their sales of higher priced fares. I don’t see the issue.

  8. Lucky, I think you are spot-on with your assessment. It definitely seems that Delta is going to closely monitor customers’ response to these fares with limited perks and gradually roll them into a number of other markets as well as “play-around” with perks that are currently offered in a slightly higher bracket (like T). Sad – but true!

  9. Hi Lucky

    The most worrying thing about all of that for me is the last to board and last for overhead luggage space. I have never seen that before with any airline; they almost don’t want you on the plane.

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