Now that the big U.S. airlines are rapidly rolling out a bare-bones Basic Economy fare option throughout their domestic systems, are they doing too much too fast?
United Airlines apparently has already found fault with the new pricing concept, and is scaling back its availability.
According to a Tweet last week by Edward Russell, a reporter for the industry publication FlightGlobal, United officials said in a presentation to an airline investment conference that they are making some changes to Basic Economy.
Their presentation said that after rolling out the new fare throughout the United network last spring, “we underappreciated that incremental revenue from buy-up would be more than offset by share loss to legacy carriers without similar offering.” Translated, that means they found customers defecting to other carriers without basic economy.
So they said United has adjusted the fare concept by scaling back its availability to only “a portion of our domestic network.”
Airlines have envisioned Basic Economy – which provides little in the way of inclusions and amenities except a seat and minimal under-seat stowage space – as a way to attract the price-sensitive travelers who may be drawn to ultra-low-cost competitors, but also to sell them a more expensive fare when they realize how little they’re getting.
However, in our experience, United did not actually lower fares when it introduced basic economy. Instead, it just applied basic economy rules to its cheapest fares with the net effect being a broad price increase. Those passengers who did not want to deal with the no-frills fares had to pay $10-$30 more to get what used to be the lowest fare along with frequent flyer miles, seat assignments, early boarding and overhead bin space.
American has been running behind United in deploying a Basic Economy option, but is now expected to have it available throughout its domestic network by the end of this month. (Delta already offers it system-wide on domestic flights.) American is also said to be considering the roll-out of a variation of the fares on international routes. And new we are hearing that international carriers, such as Aer Lingus are jumping on the bandwagon.
Notably, Alaska Airlines (and Virgin America) have not imposed a basic economy fare strategy (yet).
Will the broader availability of Basic Economy cause United to re-think its shrinking of the product? Or will American find an experience similar to United’s and scale back its own offering? Stay tuned.
What’s been your experience with basic economy fares? Please leave your comments below.