American Airlines has confirmed that they will roll back their restriction on carry-on bags for Basic Economy fares. This was rumored a few weeks ago, but it’s now been confirmed by the airline.
What’s Basic Economy?
These are new-ish fares the airlines came up with a couple of years ago. They aren’t cheaper, even if the airlines told us they were. They are more restrictive. In some cases, you don’t get a seat assignment. In others, you might not be able to bring on a full-size carry-on bag. And, the delight for consumers is that different airlines offer different restrictions. The airlines essentially created a product they don’t want you to buy.
When Is This Happening?
As reported this morning by View From The Wing, all tickets purchased or flown on or after September 5th will be allowed a full-sized carry-on bag. American has stated that the reason they’re rolling out this change is because they were uncompetitive in the marketplace. Delta allows you to bring a full-sized carry-on bag with Basic Economy fares (assuming there’s still overhead bin space when you board). That seems to have given American the motivation to make this change, though that could be cover for other reasons.
Is Basic Economy A Success?
I’d argue Basic Economy is a failure in economic terms. The airlines felt like this would be a great way to increase pricing without really increasing pricing. They were betting the restrictions would cause business travelers to “buy up”. On that single point, I bet they achieved success. I’m a business traveler. I’ve never purchased a Basic Economy fare. I need flexibility and I generally have a carry-on bag.
However, I think the airlines underestimated the outrage from regular customers, and it hurt them in the wallet. United Airlines took a hit financially because they went too far with Basic Economy pricing and restrictions. American is now rolling back the carry-on bag restriction because they feel they’re not competitive. Given that United doesn’t allow a carry-on, American is squarely targeting the likes of Delta (or maybe Southwest) when they see revenue they can grab.
There’s a cost to rolling out a new system like this that’s harder to quantify. It goes beyond a customer just deciding to book a cheaper fare somewhere else once in a while. There’s a friction level between customers and airline employees. Gate agents are already under a tremendous amount of stress. They’re now forced to act as “bag police” on certain tickets. That frustration builds and people whip out their cell phones to make damaging videos. Or, they just choose to book somewhere else.
The Final Two Pennies
Spirit is adding Wi-Fi on their flights. And, Frontier really isn’t that bad. American Airlines has made changes to some of their planes going forward, like the Boeing 737 MAX, that make them even more like Spirit 0r Frontier. Customers are seeing less legroom and smaller bathrooms. Ironically, they’re seeing more overhead bin space, and just in time to be able to use it again.
I don’t think we’ve seen the final chapter on Basic Economy fares. It’s not surprising that United is slowest to change. Scott Kirby strikes me as a determined person when it comes to revenue concepts. I don’t think he’ll be quickly deterred, but I could be proven wrong.
American Airlines has backed down and made Basic Economy a better product. That’s good for consumers who don’t need flexibility to change their tickets.
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