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A new fare increase for business travelers?

The view from the United Club at ATL (Chris McGinnis)

>Chris discovers that new Basic Economy fares don’t offer much of a discount at all- as a matter of fact, they are a thinly veiled price hike for some  travelers. 

For business and personal reasons, I fly between San Francisco and Atlanta a lot. For an upcoming four-day trip in mid-May I’ve been monitoring fares for the past month or so.

I waited to book this trip until after Easter because airlines usually lower fares for “shoulder season” travel at about this time.

But this year, that does not seem to be happening. As a matter of fact, a new wrinkle emerged this week: Basic economy fares now apply on this route. Even if you don’t fly this route at all, stick with me here, because it could soon apply in just about any market.

Here’s the lay of the land on SFO-ATL: Both Delta and United offer nonstops on the route. Delta offers several per day, and United offers two. Generally the lowest economy fares hover at around $350 roundtrip in economy. I usually favor United when flying this route because it has convenient flight times, and with my elite status, I sit in Economy Plus and occasionally get upgraded to first class for the 4-5 hour flight.

Over the last year Frontier (SFO) and Spirit (Oakland) jumped into the nonstop market with one (or fewer) flights per day. Both have offered some jaw-dropping deals… I’ve seen them as low (or lower) than $200 roundtrip. But of course you have to factor in the ultra-tight seating, fees and possibility of cancellation– reasons I shy away from these flights.

Frontier offers cheap nonstops in the SFO-ATL market (Image: Jim Glab)

For the past month, SFO-ATL roundtrips have sat stubbornly at around $420 on United and Delta. Spirit and Frontier’s fares were higher than normal, too. Around $360. (NOTE: These fares available on April 20 and subject to change.)

When fares did not come down by Tuesday this week, I was ready to throw in the towel and pay $420 on United. But something strange happened on Wednesday morning when I went to make my purchase: That $420 fare had increased to $470 and turned into a “basic economy” fare. If I wanted a regular economy fare, I’d have to pay $520, a $50 premium. On Delta, the basic economy fare was a steep $506, and the upgrade to main cabin was $26, so $532. Nothing cheap about that!

But wait… hold everything. I thought that United and Delta were adding a new low-fare option with basic economy. Not so in this case…both just slapped a basic economy label on the existing lowest fare and raised the standard economy fare. Neither of them actually lowered their fares to compete with Frontier’s lowest fare of $360.

When United pushed out its new fare category, it sounded like fares would come down in these markets— United even says so on its website: We’re introducing a new fare option, called Basic Economy, which is available on select routes and in addition to standard United Economy fares. Created for our customers who may be more price-sensitive, these lower-priced fares provide most of the same inflight services and amenities that are available with standard Economy.

When United introduced the unpopular new fares in Minneapolis earlier this year, president Scott Kirby said, “The launch of our Basic Economy product is transformational –  offering customers seeking the most budget-conscious fares United’s comfortable and reliable travel experience across our unmatched network of destinations. Basic Economy lets you go where you want to go at our lowest available fare while enjoying United’s Economy cabin and the exceptional inflight service that comes with it.”

Meh! In this case, it appears that the introduction of Basic Economy fares is a thinly veiled price hike for business travelers who need things like seat assignments, elite qualifying miles, refunds, overhead bin space and the opportunity to upgrade.

I’ll go ahead and pay the $520 fare, but I’m not happy about it…

Have you encountered a basic economy fare yet? How’d that go for you?

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Comments

  1. What was done to SWA, is horrific. SWA is great at what it does best, its not great at a lot of mainline travel – you couldn’t “bi-coastal” on SWA for example. You *could*, but you never *would*. I fly SWA 40 times a year in the West… and 50 times a year I don’t…

  2. I think that it’s the second scenario. Mergers have created a scenario with too few airlines.

  3. One problem that SWA has is that they don’t have enough aircraft available to cover their growing system. They only use Boeing 737-700 or 737-800 aircraft. They have a long standing contract with Boeing to purchase a certain number of these aircraft each year. Boeing has several years of advance orders meaning that orders for more aircraft now results a long wait before delivery. Because of this situation, SWA is trying to achieve maximum utilization of each airplane. They will not add more planes to a route unless they are sure of a high passenger load. Since DL has most destinations from ATL covered, it would not be in SWA’s corporate interests to go head to head with DL on new routes. That is a situation which could bring about fare wars which, in turn, would lower their average per aircraft revenue.

  4. SWA needs to setup its game at ATL. Not enough flights. Not sure why. They seems to use MCO more.

  5. hardly. SWA is going to eat all of these carriers. Regulation is what kept SWA from expanding at Love Field for a long time.

  6. Chris: I would do the Delta status-match challenge. Fly Delta, so much better.

    Or go to Oakland and fly Business Select on SWA. No games there. This is a disappointment. Would you consider flying Frontier given the huge price difference?

  7. I’m based in Atlanta (obviously) and find this to be the case quite often. Booking returns through to BHM or MCO are often $100-200 cheaper. ATL has become one of the more expensive cities in the US to fly out of. Delta used to ALWAYS match AirTran fares before the Southwest consolidation, because their business-class product was a threat to steal business travelers. But now they seem to ignore a lot of the low-cost carriers, knowing every business traveler in ATL is loyal to Delta.

  8. You actually thought fares would come down?

    “Basic economy” is a means of getting people to pay for things no longer included in the price of a ticket. It’s a means of raising fees, not lowering fares.

  9. looking at seat maps, i see empty airplanes, but that might make sense, if everyone is buying the basic economy fares…

  10. I expect many travelers will buy it – thats why it has to price the same as the regular economy ticket – absolutely a stealth price hike and its going to really tick off travelers when they get booked into these and don’t realize it until they get to the gate and find out they don’t actually have a seat and have to wait for the next flight.

  11. “Basic economy” gives them a price point to advertise, and perhaps blunt the low fare carriers like Southwest and Frontier. It doesn’t look like a serious product offering that they expect many travelers to buy. The price creep that Chris describes is just like a consumer goods maker putting the detergent or cereal in smaller portions but in the same packaging and at the same price point. It is a stealth price hike.

  12. I noticed the same thing myself on the Atlanta route earlier today – a $400 “Basic Economy” fare on Delta. This is not only a problem for “business travelers”. I’m 6’2″, and there is no way I can buy a fare that may result in my sitting in a middle seat from here to Atlanta (Delta makes it clear that the earliest you can select a seat is at checkin, and perhaps not until you get to the gate.)

  13. Feels like we need to go back to regulation… competition does not appear to keep the market viable any longer…

  14. Yeah…. I’m thinking that airlines must be looking at very strong advance bookings for spring and summer domestic flights.. a good sign for the industry and the economy, but not good for bargain hunters.

  16. @ Chris — If it is for business, perhaps it is tax-deductible? If so, why not just pay for first? That is what I do, and the FCQ joins me with miles if possible!

  17. Is it still the case that if you book beyond Atlanta it can be cheaper? So for instance SFO-ATL-BNA-ATL-SFO is cheaper than SFO-ATL-SFO?

    If airlines play unfair fare games with me, I will with them.

  18. I’m with you on this however I’ve noticed that all the flights in May I’ve tried to book recently are super high on many routes. I booked a MCI-ORD-Madison,WI fare last Monday and it was $600 which I thought was bad but then my Co-worker booked the same flights the next day for $900 !!
    Currently I’m looking at fares to secondary cities in Texas that would normally be $300 to $400 but are going for $500+.

  19. I agree they are trying to limit upgrade availability. I have not heard of an airline that would not raise prices if it thought it could get away with it. Fare hikes were often withdrawn from when someone would not go along… . are the big airlines colluding or do we now have too few airlines for effective competition for a relatively inelastic commodity?

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