The Real Reason Airlines Have Introduced Basic Economy Fares

This year we saw both American and United introduce basic economy fares. While Delta has been offering basic economy fares for years, American and United were a bit behind, though are also being significantly more punitive when it comes to the restrictions associated with these fares.

These types of fares have become more widespread, and the legacy carriers have used two ways to justify them:

  • It allows them to compete with low cost carriers, which charge for all kinds of extras
  • It offers passengers a lower fare option

Both of these are patently false, as I outlined the day that United introduced basic economy fares. For example, these were the fares hours before basic economy was introduced:

United-Basic-Economy-1

And here were the fares after:

United-Basic-Economy-2

I suppose the part here that’s true is that basic economy does offer passengers a lower fare option. However, that lower fare option comes in the form of the airline raising non-basic economy fares by $20-50, and then offering a $20-50 discount if you want to book a basic economy fare. What a deal. 😉

A while back, American’s president, Robert Isom, had the following to say about these fares:

“American Airlines now has something to offer every customer, from those who want simple, low-price travel to those who want an ultra-premium experience via First Class. Importantly, this new fare product also gives American the ability to compete more effectively with the growing number of ultra low-cost carriers.”

I’m not quite sure what’s more laughable — calling American’s first class experience “ultra-premium,” or suggesting that basic economy fares give airlines the opportunity to “compete more effectively with ultra low-cost carriers.”

In the latest example of how these basic economy fares are being executed, Twitter user @aheeger pointed out how United has $721 one-way basic economy fares from Orlando to San Francisco. That’s a fare of about 30 cents per mile. However, for “just” $25 more you can book a non-basic economy fare.

Basic-Economy-Fares

This is nothing new. I’ve written in the past about how expensive basic economy tickets can be, though a $721 one-way domestic ticket must be the most expensive I’ve ever seen.

So don’t believe the airline narrative on basic economy fares. Basic economy fares have nothing to do with competing effectively with ultra low cost carriers. Instead basic economy fares are another fee that airlines can charge people who don’t want to be completely miserable. If you purchase a basic economy fare, you may be punished with a seat that has only 29″ of pitch, rather than 30″ of pitch. 😉

Perhaps the slogan for basic economy should be “basic economy: because we can.”

So let’s keep calling out basic economy for what it is, rather than a “low cost alternative” or a “way to compete effectively with ultra low cost carriers.”

Comments

  1. Looking at a couple of examples and making a blanket claim based off of them isn’t exactly the way to come up with accurate narratives. While your claim is true to an extent, it is only true to an extent. While airlines are obviously doing this to make more money, in some markets that also means better competing with low cost carrier competition. Dan gave an example of the CLE to LAX route. Whereas in the past United’s fares were way higher than Frontier’s, now with the introduction of basic economy, not only are there low basic economy fares, but much lower economy fares as well. It all depends on the market.

  2. Legacy fares were already much higher than Frontier or Spirit so I don’t understand how they can really compete on airfare by essentially raising the ticket price even more. Unless they are saying “competing” in the sense of generating more incremental revenue. However that requires even more customer loyalty which is harder as they keep cutting service to the Spirit. Despite living in PHl I have become a complete free agent since AA gutted AAdvanrage.

  3. Lucky – you’re absolutely right.

    I actually view non basic economy as a way that airlines have figured out to charge an roadwarrior / elite “fee” because they cannot monetize bags or extra room seats for us. They know we’ll go out of our way to buy up to normal economy and force our employers to amend concur policies, etc to prevent being assigned to basic economy so that we can keep the perks. They’ve cleverly found a way to provide a hidden fee for accessing those “benefits”

  4. Lucky – you’re absolutely right. They’ve done this as a way to charge elites / roadwarriors to access their supposedly complimentary “benefits”. They know we’ll buy up, and they know we’ll force our employers to amend policies to exclude basic economy, so they get away with charging a per-flight fee to access your elite benefits.

  5. It might depend on the market, but BE matching the ULCCs is the exception, not the rule. You’re kidding yourself if you think that BE is matching ULCCs more than 10%, maybe even 5% for the same flights (schedule, stops, routes).

    BE is just a unilateral price increase, plain and simple.

  6. Lucky…you need to call out the airlines next time your on CNN or wherever….can’t let those idiots think we don’t know what’s going on. Keep up the good work!

  7. Well, at least it’s better than dragging a passenger off the plane after he paid for a ticket. But United has now added “swindler” to their already awful reputation. Even though I blame the flying public for this race to the bottom, cheating by the airline is still a no-no in my books. I’ve switched to Delta and Air Canada and I’m happy.

  8. @Lucky – I think you mean the slogan should be “basic economy: because *BLEEP* You!”

    🙂

  9. They think we’re the idiots for believing this latest BS.

    Now they’ve created a caste system within economy. I wonder if the Flight Attendants will be policing BE bag placement to insure that it is strictly under the seat and not in the overhead bins? Seriously, when one boards in Zone 9, if there is a square inch of overhead space available it would be a miracle. You’re right when you call this fare “punishment.”

  10. Yet basic economy seats have become extremely popular – further validating the view that ‘passengers could care less about their in-flight experience, they just want to get somewhere on the cheap.’

  11. “If you purchase a basic economy fare, you may be punished with a seat that has only 29″ of pitch, rather than 30″ of pitch”

    And if you purchase an American Airlines fare, you will soon be punished with 29″ of pitch on their 737MAX planes.

    In fact, pretty much if you get anywhere near one of the legacy airlines, you will be punished. Which is why I avoid them whenever I can.

  12. Has anyone actually looked at a direct comparison of ULCC fares vs these fraudulent BE fares on the legacies?
    I’m no expert, but I highly doubt that these two fares are even close. These fares seem to be forced on the flying public by the largest institutional shareholders(Vanguard, Blackstone et al) to push short-term financial metrics to drive short-term performance. The so-called justification for these fares is a lie. Like a few others have opined, this lie persists “because they can”.

  13. None of the features they took away actually “cost” them anything to implement. They could have competed just fine if they really wanted to.

    They’re now inflicting physical and emotional pain and stress on the customer in hopes of extorting more money. That business model is called racketeering. Plain and simple.

  14. With all due respect, I don’t know of many “ultra-low cost carriers” operating here in the US. An odd one here or there. It’s not like Spirit flies everywhere and Ryan Air or EasyJet doesn’t operate in the US. SWA isn’t ultra-low cost nor is Jet Blue. Just some smoke screens to charge people more for the same basic crap.

    Any what exactly do you get with Economy that’s not flexible? Are you still going to have to pay for a seat assignment? If so, then what’s the real difference without the 29″ pitch?

  15. “Looking at a couple of examples and making a blanket claim ” — i disagree. this is enough to make the statement.

    pax are buying them because they are the cheapest option as far as they can tell, huge majority of them dont visit blogs or do a necessary comparison. If you show them the data they will not be happy about “features” being stripped away.

    airlines are politicians.

  16. Airlines will keep on abusing us as long as all flights are fully booked. It’s been a couple of years since I’ve been on a domestic flight with an empty seat on it.
    Will Congress do anything to mitigate the abuse? Don’t count on it.

  17. I’ve noticed lately that US domestic fares are really high.
    Why are they so high when in Europe you can jump on a 4 hour flight for $50, same in Asia & Africa.

    So why do you end up paying $250 for that in US

    Is it just the pure lack of competition ?

  18. Just did a random Google Flights search, LAX-DEN, Sat May 20th:

    Spirit $42 NS
    Frontier $45 NS
    United $85 BE NS

    AA (not booking BE on this route at the moment)
    9:30 am travel time 2:30 NS $103 EC
    and my favorite:
    5am connect at ORD, travel time 7:37 $426 EC 🙂

  19. I just booked 2 economy flights on American Airlines yesterday for a July flight and the only seats available require a fee, ranging from $9 to $39/seat. These were not basic economy fares, but “regular” economy. So, apparently, nothing is “free” even outside basic economy. Given what happened on the United flight, I didn’t want to take a chance on waiting for American to release the “hidden” seats at check-in so I paid the fee. But, how can they market the advantage of being able to book seats and use overhead space if you purchase regular economy over basic economy if they don’t have any available seats in regular economy? Frankly, this all seems so shady.

  20. Happily for me I’m at a b6 hub so can often avoid the abuse that the big3 dish out. B6 Y = Y+ on the big3

  21. LOL noooo, the real reason is the vast majority of the flying public are a bunch of cheapskates! Sure we may whine and snivel about the shitty service in economy cabins, but let an airline knock $1 off the basic fare (while tacking on $50 in fees for “services” that were part of the fare before) the public be tripping over each other to grab a seat.

  22. I saw it just like you did…

    Its just a marketing reason to get people to fork over more money for the same service they always got.

    In other words, the cost of flying didnt go cheaper, but more the other way around.

  23. “Basic Economy” is a deceptive labeling tactic to hide an actual price increase. You get your choice – pay more for the same lousy service, or pay the same for even lousier service. Can someone cite a route on which this so-called “Basic Economy” actually competes with Spirit or Frontier? If they want to claim that’s what they’re doing, then let them match the LCC price. It’s a lie. Instead it’s, “Buy our Basic Economy and get the same Spirit service for twice the price.”

  24. Since becoming a free agent and flying only Southwest, JetBlue (if I can find a decent fare price), Frontier and Spirit. My life has gotten a lot better. With Frontier and Spirit, I have low expectations and they either meet them, or exceed them. Southwest is really the way to go nowadays. Though Delta isn’t too bad either, I just don’t live near a good airport where they fly out of a lot…

  25. I think this will backfire and push people towards Spirit and Frontier.

    Right now, many people simply exclude those companies from their search, because we dont want to deal with the hidden fees, anti-consumer policies, and lack of comfort. People love to claim that “the consumer always picks price first” but if that were true, these carriers would be dominating, instead, theyre still a tiny minority.

    But if AA and UA are ALSO offering hidden fees, anti-consumer policies, and lack of comfort….um, why wouldnt I just grab the cheaper one, which will continue to be Spirit and Frontier?

    Im not paying an extra $50 because the AA brand was worth it 20 years ago.

  26. Great post! I hope we can find a way to push back on this.

    Sadly just saw United’s basic economy fares appear on my most frequent route: IAD – SAN. I now have to pay $50 more on every ticket just to access my United Gold benefits, raising the lowest RT fare I can find from $450 to $500 (last year it was as low as $375). What BS after all this effort to earn and maintain Gold! Maybe its time to ditch United for Southwest’s BWI – SAN.

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