United Airlines’ New Basic Economy Fares Are Worse Than Expected (And Delta)

Basic Economy fares are the next wave of profit for the airlines.  They feel like they’re losing money by price-matching low-cost carriers like Spirit and Frontier.  Those low-cost carriers offer the customer less amenities at a much lower price.  The big airlines have decided that they, too can offer less benefits for less money and make gobs of cash.

Delta Air Lines has already been doing this for a while, though their early reports are that they’re not making markedly cash due to Basic Economy fares.  American Airlines and United Airlines have said that they’re moving to offer a similar product.

I gave my perspective on what I thought American should do with their basic economy fares.  In short:

I would give elite members the ability to select a seat on these new stripped down fares.

I would offer a product with elite-qualifying miles but no EQPs.  If American had a spending threshold like DL and UA, I would count the dollars towards the spending required to achieve elite status, but wouldn’t award any EQPs.

I would severely restrict the ability to change or cancel those flights but leave the standby policy alone.  In the case of American Airlines, I would consider not allowing confirmed standby, but potentially just “plain ‘ol standby”.

I would allow elite members to receive complimentary upgrades on these fares.  I guess you could prioritize members on these fares at the bottom of the list for upgrades in their elite status category, but I think that’s just window dressing.

And then, I would sit back and observe.  I strongly believe AA has the metrics to figure out how many elite members are buying these fares and model how much it potentially impacts the company.  And, my suggestions above don’t touch on the ability of AA to dynamically control the fare buckets so these fares aren’t offered in large quantity when they’re competing with Spirit, Frontier, etc.

I still believe this is the direction I would take if pulling the levers.

Based on this post by View From the Wing, it appears United has gone much further than I would have expected (or hoped):

These fares take away more than Delta’s Basic Economy fares. United’s Basic Economy fares will mean:

  • No seat assignments prior to check-in, and no changes to the seat you’re given
  • No ticket changes at all (instead of a $200 change fee, you’d simply forfeit the entire value of a ticket and have to buy a new one)
  • No elite status credit (no qualifying dollars, segments, or miles) although you’ll still earn redeemable miles on these fares.
  • Bring a personal item onboard only, no carry-on bags (this is waived for elites including Star Alliance Gold members and for co-brand credit card holders)
  • No elite upgrades
  • No economy plus seating for elites (and no buy up to economy plus for anyone). Elites will effectively has to start paying for economy plus, on routes where Basic Economy fares are being offered, in the form of a higher fare.

No seat assignments?  Okay, I get it.

No changes?  Yup, okay.

No elite status credit but you do get redeemable miles.  This one puzzles me.  Why wouldn’t an airline want to have some way to make every ticket an incentive to book the next one?  Redeemable miles just doesn’t do that for elite members.

No carry-on bags?  This one hurts, but in a weird way it makes some sense when there are no seat assignments.  If you’re taking the last seat on the plane, chances are there won’t be overhead space anyway. If they’re effectively boarding elite members who buy basic economy tickets at the end (not 100% certain on this but that seems like the goal) there won’t be any space in the overhead bins anyway.  This point also strikes me as the biggest reason business travelers will avoid these fares.

No elite upgrades?  I think this marginalizes all the other business the loyalty member gives to an airline.  By eliminating the upgrade path on certain flights you remove benefits elite members treasure.

No economy plus seating?  Yeah, I get that.  You’re paying less for a fare, so you probably shouldn’t get first pass at E+.  But, I do think it might be interesting to allow elite members to “buy up” to E+.

Where Does That Leave Us?

I feel like a broken record when I say that the big 3 airlines have been playing the “me too” game for the past decade.  United has now made their basic economy option worse than Delta’s.  This does not bode well for American Airlines’ elites.  I think it’s fair to say that American Airlines will digest these changes before making their decision.  I see very little chance that American will release something more rewarding than Delta.  Maybe they don’t go as far as American.  But, we’re starting to see that the airlines really believe this is the next way to return massive cash to shareholders.

I’m not the target customer for these fares.  I frequently book tickets last-minute or within a few weeks of departure.  It’s unclear to me whether these fares will be available for travelers like me.  Even if targeted, I can’t imagine I’ll buy many of these fares unless they’re very cheap.  I recently flew Frontier for the first time because it was a $400 savings for my company.  The savings were big enough to overcome the fact that I couldn’t change the ticket.

The elimination of elite benefits on these fares are likely to have a negative impact on airline loyalty.  For me, if I know there’s no elite upside to flying United, I’ll just book whatever flight is cheapest at the time I need to travel.  I won’t pick United over Frontier just for redeemable miles.  This is especially true when I can buy things like more legroom from Frontier.

I understand why the airlines think this is a good idea.  I just don’t think they’re going to get the results they’re hoping for.

10 Comments

  1. There is one other thing, Ed…

    …the basic economy airfares offered by Delta Air Lines are usually marginally cheaper than their typical economy class airfares — typically not enough of a discount when you consider what you are foregoing — but still markedly more expensive than airfares offered by ultra-low-cost carriers such as Spirit Airlines and Frontier Airlines.

    Talk about no incentive…

    1. Brian, really appreciate the data point. I’ve never looked at the pricing Delta has for those fares. American matches a lot of fares that Spirit floats out of places like DFW that are disgustingly low. Interesting to see different philosophies.

  2. There is one other thing, Ed…

    …the basic economy airfares offered by Delta Air Lines are usually marginally cheaper than their typical economy class airfares — typically not enough of a discount when you consider what you are foregoing — but still markedly more expensive than airfares offered by ultra-low-cost carriers such as Spirit Airlines and Frontier Airlines.

    Talk about no incentive…

    1. Brian, really appreciate the data point. I’ve never looked at the pricing Delta has for those fares. American matches a lot of fares that Spirit floats out of places like DFW that are disgustingly low. Interesting to see different philosophies.

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