Alaska Airlines Adding Basic Economy, Increasing Fees For Ticket Changes

Alaska Airlines had their second quarter earnings call today, which included the usual business updates, along with the announcement of some new fees and initiatives.

As a reminder, last quarter Alaska noted that they were modeling $100 million in revenue increases from changes that “address upsell and segmentation opportunities.” The announcements made today, which include combining systems with Virgin America, increasing passenger fees, and introducing a basic economy fare, show a bit of how Alaska intends to meet that goal.

New “Saver Fares”

In many ways this was inevitable, and after making hints earlier in the year, Alaska will be introducing a basic economy concept this fall, with non-changeable Saver Fares.

Unlike other carriers, Alaska’s basic fares will still allow assigned seats (and presumably online check-in, given how tech-focused Alaska is), but those seats will be restricted to the rear of the aircraft. Saver Fare passengers will also be in the last boarding group.

It’s worth noting that these fares will not be upgrade eligible, so like with other carriers, elites will have to pay more to utilize their benefits.

We don’t know yet what mileage earning will look like on these fares, but since this fare is being implemented as a way to generate additional revenue, I’m not optimistic.

Increased change fees

Alaska has long offered one of the most generous policies when it comes to changing tickets. For changes more than 60 days prior to departure, passengers have been allowed to change or cancel their ticket (revenue or award) without a penalty, and have only needed to pay the fare difference.

Going forward (and I don’t have the exact date on this yet), those fees will apply after the 24-hour purchase window has expired. Alaska describes this as “ending change fee waivers”, but in practice this is the addition of a $125 change/cancellation fee to both paid and award tickets.

Alaska MVP Gold and Gold 75k members will continue to have these fees waived.

This doesn’t seem like an unreasonable change given the competitive landscape, but is still disappointing to see. In many of their markets Alaska faces more competition from Southwest than American, Delta, or United, and the former doesn’t levy change fees even on the day of departure. The announcement of this policy might not drive a shift in business, but customers who are used to having that flexibility will likely be (vocally) disappointed once they experience the new rules for the first time.

Other ancillary fees

As part of the efforts towards increasing fare segmentation, Alaska will also begin charging extra for seats in the exit rows. I honestly assumed that Alaska was already charging a premium for exit row seats, so this doesn’t seem like that drastic of a change.

My suspicion is that this is just the start of additional ancillary fees at Alaska, and that we’ll see more small fees like this rolled out over time.

Continued absorption of Virgin America

Beginning Tuesday night, the Alaska and Virgin America reservations systems will be combined. That means a single system on the back-end, and users of the Virgin America app or website will be directed to the Alaska versions.

Wednesday morning should reveal a system-wide update to all branding as well, with Alaska imagery used exclusively at all airports.

Of course, it will still be several months before all the Virgin America aircraft are repainted, but given how smoothly Alaska rolled out their new branding a few years ago I’d expect this part of the transition to go well — at least visually.


Economy cabin of a Virgin America A320

Bottom line

I understand why Alaska is implementing many of these changes — the company has an obligation to generate revenue for their shareholders, and given the competitive landscape they’ve probably been leaving money on the table here. The service differentiators Alaska is known for can’t realistically command much of a revenue premium in the US market.

At the same time, this is a continuation of a discouraging trend from Alaska. There’s less and less to differentiate them from other carriers, and cost-cutting and raising fees certainly contributes to that sentiment. Hopefully the airline finds ways to preserve their culture and the passenger experience while seeking out these additional revenue streams.

What do you think about the changes at Alaska? 

(h/t The Seattle Times and No Mas Coach)

Comments

  1. So if I book a ticket now for October, would the old policy (no change or cancellation fee if changes occur more than 60 days before the flight) hold?

  2. @ Julian — Usually whatever terms are associated with your ticket purchase apply for the duration of the ticket, so probably, but since we don’t even know when exactly these fees will be implemented, you’re probably fine regardless.

  3. Shame airlines can’t be more original anymore or unique and all have to adopt the same revenue options.

    Southwest seems to be the only airline that is avoiding basic economy fares and change fees anymore.

  4. Alaska’s front line employees, pilots, and FA’s are some of the nicest, most professional, most genuinely caring people in the business. Their operation is admirably efficient, and they’re damn punctual . But everyone in charge of their pax experience has to be D-list bean counters who honestly can’t figure out why Virgin America flyers are leaving in droves despite running cringy “cool kids” advertising.

    Of course their revenue and profitability on Virgin’s routes is plummeting, but their only response has been keep cutting service and amenities to squeeze every penny like the legacies did 10 years ago. Alaska’s old way of doing business may work for shaking down the Spokane to Beaverville crowd, but the LAX, SFO, and transcon flier has way better options and zero affinity to ‘the airline that ruined Virgin America.’ They had an airline that realized their fliers will happily hand over money for a premium experience and instead they’re turning back to “nah, let’s just threaten you with a middle seat in the back.”

    About the only good thing I can say came from the merger is it got JetBlue to bring Mint to Seattle and San Diego, and boy is it a refreshing upgrade.

  5. I’ve not flown another airline, when Alaska was an option, in over a decade, despite regularly paying a premium for Alaska tickets. I won’t give up on them quickly. Their baggage assistants, check-in reps, and flight attendants have treated my family exceptionally well, even when we were disorganized, running late, and/or trying to comfort a toddler having a rough flight. Just last week, we found our gate-checked stroller re-assembled and ready to go when we stepped off the plane into the jetway–a nice, and helpful, gesture. But this news is not good, and it suggests that some people within the company have lost sight of what makes Alaska special. I’ve never felt like I was less than a valued passenger on Alaska. I hope this new class of folks, literally relegated to the very back of the plane on ‘saver’ tickets, don’t end up feeling that way. There are other airlines for that.

  6. Currently, exit row seating is available free for elite Mileage Plan passengers but doesn’t even show up as available for cattle level Mileage Plan passengers. When I am able to get an exit row seat, I decline wait listing for Premium Class because with the end of the mini-snack box, an exit row seat is unquestionably better than Premium Class.

    There is a tiny bit of hope that exit rows will be considered Premium Class so they will cost more but easily free upgradable for elites. I hope they won’t be more costly for elites.

  7. I’ve only used the 60 day changes once but this is undesired “enhancement” as is the probability that exit row seating will come at a cost.

    I don’t get mad. I simply see the conversion to Southwest as being a little bit closer. Currently, Alaska has the advantage to some transcon non-stops and a better frequent flyer program.

  8. “Alaska faces more competition from Southwest … [which] doesn’t levy change fees even on the day of departure”

    Yeah, but Southwest… isn’t that the airline that’s just killed one of its pax with an engine blowout? Where a previous engine blowout had led the FAA to propose engine checks, but didn’t Southwest then lobby furiously to have the compliance deadline extended – so that the deadline still hadn’t been reached when this second engine blew out (I’m not even sure the checks had been ordered by that point)? *

    Good old Southwest. It only kills the occasional passenger. But it sure has a more flexible ticket change policy…

    I’m not sure Alaska has that much real competition here.

    * some quotes from the media which appear to support me:

    “The FAA in August 2017 drafted an order giving airline up to 18 months to carry out checks, but it had not finalized the measure by the time of Tuesday’s fatal second accident.

    “The EASA [European equivalent of FAA] had rejected a request by one airline to double the time allowed for checks to 18 months, matching the FAA’s roll-out, saying data did not justify that. …

    “Southwest, which had opposed efforts by the engine maker last year to shorten the FAA’s earlier proposed deadline, on Friday said its maintenance programme meets or exceeds the new requirements.”

    Source: Telegraph.co.uk

  9. AS is also pulling out of LaGuardia. Not good. But there is salvage value. It’s not a sale but a 10 year lease of the slots to WN AND possible to get back those slots if the LGA perimeter rule changes

  10. ^^ 2 posts up. Not so fast. Ok, Southwest kills one passenger. Alaska killed a whole planeful when they didn’t lubricate the jackscrew causing the plane to crash in the ocean off Los Angeles.

  11. @The nice Paul – get the *&^% outta here with your lame ass argument. What was your reason for not flying SW 2 weeks ago? Pssssss

  12. Increasingly feeling like Brad Tilden (et. al) represent just another collection of warm bodies in the AV sector going through the motions. I really don’t think they get it, and that’s very bad news for AS. Would be nice to see some intelligent, fearless leadership instead. (Oh wait, they just ate and are in the process of dismantling that amazing airline).

    They’ll have to do better than this to continue fend off DL at SEA (and everyone else at SFO and LAX). They can’t beat the Meager-3 if they continue get sucked into this kind of attitude towards their customers because of some D-grade B-school herd mentality.

    This isn’t just a numbers game, but of course bean counters aren’t generally equipped to really figure that out…

  13. @Tiffany: Where did you get the i go that it does not get elite upgrades? i don’t remember hearing that part in the earnings call… view from the wing reported that, too, but again, i don’t know what his source is. Thanks for clarifying!

  14. The ability to make changes up to 60 days prior to departure was one of the main reasons I was willing to book travel far out. It has been a big part of my loyalty to AS and seems like a poor decision to eliminate it because I’ll bet that the increase in revenue will be small because most casual travelers probably don’t even know about it but those who fly frequently, but not enough to make MVP Gold do and appreciate the benefit.

    I’ve always been willing to pay a premium to fly AS. I’m not sure that’s the going to be the case in the future and suspect it may be the same for enough other travelers that they may find it harder to charge a bit more than their competitors going forward.

    Give more/get more has been the AS way. Perhaps they feel they’re building enough of a fortress hub in SEA and PDX that they’ll do better with a give the same/charge the same strategy. The problem with that is when things go wrong AS customers cut the company lots of slack because the feeling is they are doing right by them. These changes make that less credible and once the relationship changes to the customer no longer has an affinity for who they are doing business with both parties begin to act in ways that can be very costly.

    Bottom line for me is unless AS gives a bit more so they stand apart from the crowd their unique position in the market is eroded and they’re just another airline competing on price and schedule. Short term they’ll make more money but I’m hard pressed to believe that in the long run they’ll be more profitable but only time will tell.

  15. Alaska could give a little more by allowing non-elite mileage plan families a chance to combine miles once a year, instead of restricting that opportunity to elites. Loyal families buy quite a few seats each year without getting any elite status. That’s life, but it shouldn’t also be so hard to use the miles those passengers earn.

  16. I just did a mock award booking and saw this in the fare rules:

    “Changes/cancellations: If travel hasn’t begun, you can make one change to this itinerary, or you can cancel and redeposit miles within 24 hours of original purchase with no fee.”

    “Changes to this itinerary are subject to additional fare and taxes. A fee of $125 USD per person will also be assessed for changes and cancellations made on or after January 20, 2019. Change fees are waived for all MVP® Gold members.”

  17. @Tiffany – quick question. Where did you get the info that change fees will not be implemented for MVPG and 75k elites? The Flyertalk Alaska Room is going crazy, and one of the posts quoted OMAAT with this info. But I didn’t see it mentioned in the Seattle newspaper article. Was this level of detail mentioned today in the earnings call? Or do you have an inside source?
    This feature is one of the main things that keeps me from going to Southwest. If I lose the ability of free cancellation (because I pay for my own tickets, and my plans change sometimes), it would push me further towards going all-in with Southwest.
    Thanks.

  18. @ mm — Because the status benefits for Mileage Plan elites aren’t changing. Right now AS elites don’t pay change or cancelation fees up until departure, it doesn’t make sense that with the waiver ending for the general population that AS elites would be paying fees 60+ days before departure, but not 0-59 days. I confirmed this with Alaska directly as well.

  19. I don’t know what all the fuss is about. Alaska is trying to make more money, and rightfully so since they’re becoming a large airline in comparison. It’s time to start competing with the Big3.

  20. @Issac… They are not allowed in the admiral’s club, though AS lounge members have access to most other admiral’s clubs. Flyertalk Alaska diehards want AS to turn the Yoga Room at SFO into a temporary lounge until they secure more permanent space, haha.

  21. Always amazed Southwest Airline can do without those fees and still be a very profitable Airlines. Why no one could follow Southwest but big 3?

  22. @Abe… some argue Alaska’s biggest competitor in many markets as well as in types of flyers is Southwest. Copying the big three, with limited luxury products (eg trans con – no lie flats, few lounges) and limited international footprint and east coast route network is not necessarily the best business model. Yet their biggest competitors on the West Coast is Southwest, which has no change fees, free baggage, and select-your-own-seat.

  23. Ugh. It seems the formula for starting an airline is:
    1) Start airline from scratch.
    2) Hire great staff, have great customer service
    3) Offer a product or services that are different from the legacy carriers
    4) Expand your network
    5) Get greedy, clone the legacy carriers, lose everything which made your airline unique & desirable.
    6) Either file for bankruptcy or get bought up by another airline. If combined, the combined airline will take the worst of both operations and make that policy throughout.

    Does anyone remember when JetBlue used to be awesome? I still like B6, but it’s not the same operation it was 10 years ago.

  24. @kg There are major differences between the “race to the bottom monkey see monkey do” airlines and Southwest, but your point is well taken. Southwest milks its differences in its advertising campaigns. It taunts the others. It differentiates. For Southwest, to head in the direction of the others would mean an entire change in how they have identified themselves to the public for years. In my opinion their shareholders (I am not one) know that, and have chosen to be investing in something different. Maybe they like the way Southwest’s long term growth has come about and don’t go nuts over immediate-term money left on the table the way those of the other airlines seem to, because they identify with a plan that has worked well over a long horizon and promises to continue doing so.

    I am not a “Southwest only” person, but I’ll admit I’ve taken connecting flights on Southwest over direct flights on other carriers because I like what they do. Southwest doesn’t serve everywhere I go, and sometimes it serves destinations in airports that I don’t find convenient (I almost never really want to be in Midway), so I travel the others combined about as much as Southwest domestically. I always have a feeling of welcome and courtesy with Southwest that is hit and miss elsewhere, as well as in general preferring their policies and pricing mechanisms.

  25. @Alpha
    While Virgin America was cool and some people liked it, the reality is that it was a money losing airline that only started to be marginally profitable once oil started going down and they stopped growing so quickly. The reality also is that it never had a fare premium in any of its markets (ie, United, which is nowhere near as cool as Virgin, always was able to command higher fares than Virgin, and was more profitable than Virgin, in all its markets). At the end of the day, it was an airline looking for a buyer to make it profitable, and that’s what Alaska is doing. Alaska may not be as freewheeling and hip as Virgin thinks it was (that safety video was DREADFUL), but they know how to run a good operation and a profitable company, something that Virgin never really succeeded in doing.

  26. @Jason
    It’s the same refrain from the Alaska peanut gallery, that Virgin was ‘barely profitable’ and that Alaska is more profitable, thus running Virgin America like Alaska will lead to much more profitability.

    Except it won’t. Virgin ran different, far more competitive routes, with the fiercest domestic competition targeting the most aspirational markets and grew their airline from scratch doing so. You can’t put Alaska’s value proposition on Virgin’s routes and expect it to work, which is why they’re hemorrhaging money on them now.

    Alaska’s business model worked for them in the sticks, it doesn’t work in the big leagues. They simply don’t have a compelling value proposition to the rest of the country that can fly Southwest for significantly more flexibility or JetBlue for a significantly better product.

  27. @Alpha – “Alaska’s front line employees, pilots, and FA’s are some of the nicest, most professional, most genuinely caring people in the business.”

    Yeah I could care less about that when all they can say about all the various issues they have had is “we know it is an issue we are working on it but nothing can really be done.” Thanks for being nice but nice doesn’t help me get the job done.

  28. @Eric NYC –
    I certainly feel that frustration. I’ve had a ton of problems with my recent Alaska/Virgin flights (including two instances where I got evicted from my seat -after- I sat down because their ticketing system had double booked the flight.) They still haven’t fully resolved or handled the compensation from that.

    That said, I’ve had people from their operations reach out to me in the past and work to find a solution or compensate me for a bad experience and have done so with personally written letter as opposed to some canned response, and the -only- other airline to ever do the same was JetBlue.

  29. As a former MVP Gold member and an Alaskan born resident flying them since 1966 I can only say they better be careful. There are other options out there such as Delta and if AK Management wants to continue to reduce service, amenities and benefits they will see a mass exodus of their once loyal customer base. I only wish Mr Tilden read this blog and maybe he would understand the underlying discontent among his base

  30. Alaska really is starting to piss me off. When you call them to book CX fares, which are not bookable any other way, they still charge for the phone call. Other airlines waive the fee. They also charge a phone fee for QA J fares that cannot be booked on-line because the web site is broken and has been for two years.

    When trying to book flights back from New Zealand next March they will now impose a change fee. The ability to optimize the flight up to 60 days out was a major selling point.

    Unfortunately AS does not have access to CX F until a week from the flight so we have to cough up a change fee of $125 US in addition to the phone call charge and ‘partner airline’ charge. Nickle and dimeing the whole way!

    Then there was the EK fiasco. Got caught on that one having booked outbound when flights became available and waiting to book the return when – bam – the flights doubled in price. Had already purchased the points necessary for the return fare and they still are in my AS points bank. At this rate will not be able to use them before everything turns very sour. On a very slippery downward slope. Starting to look for another carrier that I can trust more than AS to not continuously devalue everything that made them superior.

    They have even cancelled two of the three daily flights into my home airport starting in December. Looks like AC will be the only show in town soon.

  31. Not happy about the 60 day change fee rule. I have used that multiple times, and I don’t think I am going to make Gold again for 2019 so was planning on being able to use that to adjust award reservations for free.

  32. If Alaska has to do this, it would be nice if they allowed routing changes on award tickets for free like AA does.

    Also will be sad to lose the Alaska no cancelation fee on revenue tickets as a method for extracting the full value from Merrill+ Visa awards. Does anyone know if any airlines allow you to chose to get money back as an airline credit when canceling in the free 24 hour cancel period…or does everyone force you to refund to original payment method??

  33. @Isaac @mm I think we will have to wait until SFO is done with the remodel of Terminal 1 and AA moves out of Terminal 2. Then AS can take over the Admirals Club. The yoga room is quite small and dark, but could be just like the temporary United Clubs that Terminal 3 had. It’s hard to believe that for its entire existence VX did not have a lounge at its home airport (granted there was some sort of access to the VS clubhouse in the Int’l terminal).

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