American Basic Economy Fares Are Coming In January 2017

Among US carriers, Delta was the first to introduce “basic economy” fares. This is an attempt to compete with ultra-low cost carriers like Spirit and Allegiant.

Spirit-Airlines

The intent is that the cheapest fares in some markets will come with even fewer benefits, like not being eligible for any sort of ticket changes (even for a fee), not allowing advance seat assignments, not allowing free upgrades, etc. The logic is that this will allow them to compete with low cost carriers on price, when they might not otherwise be able to.

Delta-Basic-Economy-1

While “basic economy” fares were initially rolled out in select markets where low cost carriers were dominant, they’ve since spread to many more routes.

We’ve known for a while that American and United are planning on rolling out basic economy fares as well. Initially American was going to introduce basic economy fares in late 2016, though it seems they’re delaying it a bit due to the busy holiday travel season. American’s management addressed this yesterday on their earnings call.

Instead, American is on track to introduce basic economy in January 2017. We don’t have an exact date yet, but whenever this happens you can expect that the cheapest fares in many markets won’t offer free seat assignments, complimentary elite upgrades, etc.

In practice unfortunately these basic economy fares generally aren’t actually causing airlines to introduce lower fares, but rather we’re just seeing the cost of airfare shift up. In other words, expect the current lowest fares in markets to be similar to the basic economy fares, while “non-basic” fares will likely be more.

American-Economy
Expect to pay more soon if you’d like an advance seat assignment or upgrade on American

Bottom line

I’m certainly not looking forward to American introducing basic economy fares, though it’s inevitable. Unfortunately the introduction of basic economy is yet another huge devaluation for elite members. We’ve seen AAdvantage go revenue based, cut the number of systemwide upgrades that top tier elites get in half, and also greatly devalue their award chart. Soon elite members will need to pay a premium to even take advantage of their elite benefits.

Comments

  1. I’m pretty basic (and pretty cheap), but I can’t see myself buying one of these fares. Yet another reason to switch to JetBlue.

  2. One paper cut at a time AA continues to destroy AAdvantage. Free agency is looking highly likely for 2017.

  3. So, if the price isn’t dropping, they’re really not competing with the discount carriers then. Just taking away services.

  4. When is AA’s Premium Economy going to be introduced across their fleet? Not that I’m looking forward to this class of service…

  5. 1) I hope that AA introduces a new fare code for this (like Delta and the “E” fare code) and not just reclassify “O” (currently, most often the lowest) as basic economy.
    2) From my limited experience with Delta since the introduction of Basic Economy, I haven’t noticed basic economy fare being more than $15-20 cheaper than the normal fare. I again, hope this will be the case with AA.

  6. You cannot blame the airlines. These are the fares that show up in the search engines. As long as a significant percentage of the buying public shops for the lowest price on OTA’s, then to compete with the LCC’s, the legacy airlines are going to have to offer fares and service classes that compete. As crappy as Spirit and Allegiant are, they can offer a lower price, and people will choose them. This is the game of the price aggregator. In the auto industry, we used to have a ‘basic economy’ version of a lot of cars. No auto steering, cheap seats, crank windows, no features. They were loss leaders to get the search traffic and then you basically build up your car from there. Same with airlines. The basic fares get you to the site, then you start adding up seat assignments, checked luggage, leg room, meals etc. It sure makes a lot more sense than someone like BA charging for seat assignments on Business Class.

  7. Clearly Southwest becomes the better option – fares changeable, free checked bag, you’ll get some (even a few) Rapid Rewards points, and even though no seat assignment, status in A list will get you on early enough to claim the seat you want.

    For those working for a corporation where they have to use a travel site that forces buying lowest fares, these basic economy flights will be a huge “downgrade” – no status, no seat assignment, no miles…

  8. On Delta it’s been my experience that basic economy without an advance seat assignment usually means I end up getting a seat in Economy Comfort because nothing else is available. Where’s the logic in that?

    Someday someone is going to get smart and split up the seat map not by cabin, but by fare class. Basic economy gets seat assignments in the back of the plane, next to the galley and lavs.

  9. Guys – it’s simple. Airlines created loyalty programs and thought they could pull the rug from under us. We’re still idiots if we care about loyalty outside of the top tiers.

    I’m a 75K – 90K mile a year flier. I’m a total free agent 2017 on and it’s feeling awesome. Save your loyalty for people who give it back. Treat the airlines the way they deserve to be treated – convenience, reliability, and price.

    Shopping for airline tickets will be just like shopping for gas 🙂

  10. This is actually going to be very interesting from a business perspective. My firm’s booking tool automatically pulls the lowest rate class from carrier’s sites, and I can book whichever carrier I’d like to (as long as it’s the lowest bookable rate for that carrier). In the past, the high chance of getting an upgrade due to status pushed me towards flying American. However, now that I won’t be able to enjoy any elite benefits, I will likely fly Southwest or JetBlue. I’m wondering how many of American’s elites will make similar decisions when flying for business, and simply forgo loyalty altogether, since what’s the point in flying an airline that treats you as if you were your fair: basic? If enough follow suit, the revenue implications will be interesting.

  11. Travel in the United States is horrible.

    Amtrak costs $180 to take the crummy “Regional” train from DC to NYC; buses pick you up in squalid stations or on sun-baked sidewalks; airfares are double or triple the cost of airfares in Western Europe.

    I prefer traveling in developing countries to traveling in the USA, because at least the bus service is superior, especially in South America.

  12. It’s nothing more than a temporary market reaction to the sudden inrush of hundreds of millions of credit card sign-up bonus points, debasing the value of frequent flyer programs across-the-board. It’s only supply side economics at work again. Relief will come as these credit card nouveaus max out their accounts and slowly become ensnared in consumer debt. Eventually, some hapless few will squat under overpasses in leaky tents, which is too bad, but except maybe for Spirit, none will crowd airliners again. Then it’ll be champagne breakfasts for every flyer!

  13. Mike, are you joking? It’s not clear.

    The problem with the US domestic aviation market is that there is no market — there’s oligopoly!

    In contrast, in Europe, almost every EU member state has its own national airline, as well as a number of low-cost carriers (e.g. Wizz, RyanAir, EasyJet, Vueling, etc.) thrown into the mix; plus you have high-speed rail providing viable competition to the aviation sector. And, you also have 200 million more customers than in the USA, in a smaller geographic space.

    The U.S. could have cheaper domestic fares, but as with health care and war, our government instead prefers cronyism and corporate-governmental corruption.

  14. I was going to credit my next AA miles for the extra 2 SWU, but now i’m crediting to AS. It just gets worse. The irony is that they just push me more and more to the ME3 and AS/B6

  15. As usual, the legacy carriers devalue their product to “compete” with LCC’s Just crazy. Instead, they need to differentiate themselves to make people want to fly them. Instead, Doug Parker is counting pennies. While I get it’s a business, the customer experience has greatly been diminished. I’m soon to be Platinum for life. I have no incentive to continue flying American Airlines since it’s nearly impossible to upgrade. Frankly the new American sucks!

  16. Recall, 87% percent of revenue came from once a year flyers, many of whom I would suggest will buy the cheaper tickets. We’ll have to see how it’s rolled out – what’s included, what’s not. If a single carry on bag (no personal item) is included, for instance, perhaps some budget flyers will opt-out of the second bag; this will free up overhead space and improve boarding efficiency. Only a single example there.

    As an earlier poster said, I do agree somewhat that Airlines have become corrupt with their vulture crony capitalism, which unfortuantely is a big problem. Despite the potential positive of the fares, it’s important to say, and I still feel, They Really Underappreciate My Patronage in 2016

  17. Next they’ll create a bare bones fare:

    Can’t use the bathroom
    Can’t talk unless spoken to
    Can’t make direct eye contact with others
    Can’t use arm rest if sitting next to someone
    Obviously no drinks or water
    Must deplane last
    May be asked to sit in the overhead compartment
    Cannot touch luggage if seated in overhead compartment
    Cannot scratch inside of overhead compartment with fingernails in attempt to break out

  18. @Kevin – the only problem with trying to look at Southwest as the better option is that it means having to fly on Southwest.

    I think that MarkF has a good observation here – I suspect that to a great degree, the three network carriers are just playing the search engine game. This will reduce loyalty in the lower-fare and less-frequent-flying part of the market, but it’s just the next logical step in the evolution of the FF programs, to pull the focus of the programs back to the true frequent flyers.

  19. Really? Bad for elites? Please do tell me – why should AA or any other legacy carrier give you the same benefits you were getting 2 years ago when the lowest LAX-JFK date was $600, while now that can be had for half as much? Yeah, that’s exactly it.

  20. On the other end of the spectrum I would pay more for a lap dance.

    Can’t a middle eastern arab prince get more luxury than currently provided if he is wiling to pay for it?

    Ps: I am always amazed how much crap Americans will take from their government. Some educated electorate you have there.

  21. AA keep getting big profits every year and at the same time they can’t stop cutting benefits to their loyal customers.

    This economy fare is a total BS, what they are going to do is reclassify “O” and it will became Delta’s “E” fare. They will not offer a cheaper fares than the actual “O”. I have seen MIA-NYC/ORD/BOS/PHL/BWI/DEN roundtrip for $80~115, which are pretty cheap for what I consider low season in USA (September to March, cold months on many places). But even with that cheap fare, they can’t beat Frontier/Spirit sales.

  22. It never ceases to amaze me how so many people take things like these as personal insults! If you don’t like it move on, the whining about how you thought you were, or should be, treated as an individual by huge companies who have tens of millions of other customers seems rather bizarre. Do you throw the same hissy fit when Walmart increases the price of a candy bar?

  23. @Roberto Way to pick one single example specifically to try to prove your point. The fact is that 10 years ago you could fly on AA domestically on any number of routes for pretty much what you have to pay now (yes, adjusted for inflation) because that’s exactly what I was doing….and fuel was a lot more expensive then than it is now.

    Airlines are feeling emboldened to do whatever they want because, as so many previous posters have said, there is simply not enough competition…and the US3 are trying to kill what little competition there is.

    Fuel prices are low and profits have never been higher so there is no desperate need for airlines to cut-back or strip out benefits to compete with low-cost carriers…and yet that’s exactly what they’re doing. Why? Because they can.

  24. @JD & CraigTPA — I’m 100% with you on this! One of the US3 airlines (Delta?) really needs to step UP their game rather than a race to the bottom. Let the LCCs deal with the Kettles and focus on business & frequent flyers. Offer a premium product and price it accordingly. Business travelers aren’t as price sensitive as the Kettles.

    B6 is our office go-to for domestic when their schedule & routes match where we need to go, Delta gets the sloppy seconds. UA/AA — forget it. They’ve screwed our employees more times than I can imagine. I’m slightly ticked @ B6 due to extra fees slowly creeping up. I still remember when B6 offered 2 checked bags free and change fees were non-existent/minimal.

    I find the popularity of Southwest as somewhat of an enigma. Obviously the lack of annoying fees is good…but going through the past 2 years’ worth of office reservations, Southwest was more expensive every single time, even factoring in fees on the US3. Often substantially more. If they’d at least do away with the seating chaos, I’d probably book them for our office as they often have directs when the others have connecting, price be damned.

  25. @ Matt S.

    Generally the legacy carriers are already matching fares with the discount carriers, so they don’t need to lower fares to compete. They are just reducing thier costs by reducing benefits on “basic fares”.

    For this lowest-Y business traveler, these fares are irrelevant. Our policy is lowest “reasonable” fare. These aren’t “reasonable” – no ability to change (even with penalty, no seat assignments). As a 100K+ per year elite-status flyer, I don’t consider these a devaluation at all. In fact I am all for them – as they actually reduce competition for elite benefits.

  26. ” Soon elite members will need to pay a premium to even take advantage of their elite benefits.”
    Just like they do on Delta, where loyalty remains high and they continue to make lots of money. This is a necessary step for the airlines. The majority of people use third-party travel website to book flights and a good 75% of the passengers on a plane only fly once a year, and probably dont even have a frequent flier account. But sure lets keep whining about how its not pure luxury everytime we fly when everyone still wants the cheapest ticket.

  27. @Bob. I agree fully. Corporate travel departments will not require their travelers to buy these fares once they realize the limitations that come with them. I would have no problem justifying the next highest fare bucket. The issue will be whether the on-line systems will be smart enough to offer the lowest non-basic economy fare as an option, as opposed to just lowest and full fare.

  28. @AlexS, Can someone explain to me the problem & chaos of the Southwest boarding process? I see nothing wrong with it. My AA upgrades don’t clear too often. But, when they do, yeah it’s nice to board first and not have to worry about the boarding chaos, regardless of carrier. For boarding economy I prefer Southwest’s group boarding over trying to push my way past all the gate fleas with a lower boarding priority. And nothing pisses me off more than AA calling EXP boarding with all the other elites. At least with Southwest the person boarding before me has a higher priority and we are all in a line. While on AA all the credit card, Gold, Platinum, etc, are standing there blocking the path long before boarding starts.

    I have lost track of how many times I have watched someone fight through the aisle because they walked past their seat! That does not happen on Southwest until the plane is full. By then the aisle is empty anyway and that straggler can easily walk back to 7B.

    I agree about the prices though. Seems Southwest is only getting my business on the nonstop routes. If I have to make a stop, Southwest is coming up more expensive every time.

    Looking forward to my first JetBlue flight in December. Couldn’t pass up the rate during the two day, 30% sale, even though landing in FLL is not as convenient as MIA for me. I guess I will take the Tri-Rail to Miami. You can read about my experience on my blog, “How to earn less than a $1 per hour at your second job.” coming to BoardingArea soon. Or, maybe I’ll call it “How to spend hundreds of hours to save less than $100.”?

  29. I agree with all the noise on the boarding process. It is a big mess.
    OneWorld $3000 airfare on British Airways First and Business Class- you are not granted a secured seat. (!?!) If I ran my business the way they ran theirs….. I would be fired….. they are really failing on so many counts. JetBlue and Southwest…. at least you get what you pay for.
    American really needs to AMP UP ITS GAME- if 2017 is the year they move forward (as they have made so many loyal customers seeking other options).

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