Half of AA Customers Paying More to Avoid Basic Economy
This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.
On February 21, American Airlines started selling Basic Economy fares for flights starting March 1. Now that we’re almost two months into the process, we’re getting our first glance into how it’s going. In its investment filings this morning, American Airlines President Robert Isom focuses on customer choice when announcing how this has gone so far:
While it’s still early, the initial results from our new Basic and Premium Economy products are encouraging. Approximately 50 percent of customers who are presented with a choice for Basic Economy end up choosing a Main Cabin fare, showing that they understand their options and are choosing the ticket that’s the right fit for their travel.
In the prepared statement, CEO Doug Parker continues to beat the “choice” drum:
We successfully launched several important commercial initiatives, including Basic Economy and Premium Economy, which are designed to provide more choice for our customers.
On the investor conference call, you could tell that management was trying to send a signal to investors about how “encouraging” this was for financial results — without outright saying how happy they are with charging customers more for the same product they were getting before. While AA hasn’t yet quantified how much of an impact this has had on financial results, the airline is expecting $1 billion per year in additional revenue once Basic Economy and Premium Economy are fully rolled out.
Since the initial launch, American Airlines has quietly added another route: New Orleans (MSY) — Tampa (TPA). But, there are many more to come. AA management told investors more routes are going to be rolled out in May and June, but they wouldn’t elaborate when asked about which city pairs would be included — leading to press questions about why AA is being so “secretive.”
How It’s Going at the Gate
In the risks section of its financial filings, Basic Economy continues to be listed in “Changes to our business model that are designed to increase revenues may not be successful and may cause operational difficulties or decreased demand.” So, how’s the rollout impacting operations so far?
When asked about how the introduction of Basic Economy is going at the gate, management continued with the positive tone. So far, the airline is “benefiting from the tremendous amount of planning and training” and “customers understand the restrictions… and are complying.” So, there have been “no issues” so far, no impact when it comes to on-time departures and flight attendants appreciate having fewer bags on board.
One thing is clear: Whether it’s all about “customer choice” or just a way of raising additional revenue, Basic Economy is here and it’s going to continue to expand. We are continuing to look forward to American Airlines honoring its commitment to match the low-cost carrier pricing for Basic Economy — which largely hasn’t been the case so far.
Welcome to The Points Guy!
Earn 50,000 bonus miles and 5,000 Medallion® Qualification Miles (MQMs) after you spend $2,000 in purchases on your new card in the first three months of card membership. Plus, earn up to $100 back in statement credits for eligible purchases at U.S. restaurants in the first three months of card membership.
With Status Boost™, earn 10,000 Medallion Qualification Miles (MQMs) after you spend $25,000 in purchases on your Card in a calendar year, up to two times per year getting you closer to Medallion Status. Earn 3X Miles on Delta purchases and purchases made directly with hotels, 2X Miles at restaurants and at U.S. supermarkets and earn 1X Mile on all other eligible purchases. Terms Apply.
- Earn 50,000 Bonus Miles and 5,000 Medallion® Qualification Miles (MQMs) after you spend $2,000 in purchases on your new Card in your first 3 months.
- Plus, earn up to $100 back in statement credits for eligible purchases at U.S. restaurants with your card within the first 3 months of membership.
- Earn up to 20,000 Medallion® Qualification Miles (MQMs) with Status Boost® per year. After you spend $25,000 in purchases on your Card in a calendar year, you can earn 10,000 MQMs two times per year, getting you closer to Medallion® Status. MQMs are used to determine Medallion® Status and are different than miles you earn toward flights.
- Earn 3X Miles on Delta purchases and purchases made directly with hotels.
- Earn 2X Miles at restaurants worldwide, including takeout and delivery and at U.S. supermarkets.
- Earn 1X Miles on all other eligible purchases.
- Receive a Domestic Main Cabin round-trip companion certificate each year upon renewal of your Card. *Payment of the government imposed taxes and fees of no more than $75 for roundtrip domestic flights (for itineraries with up to four flight segments) is required. Baggage charges and other restrictions apply. See terms and conditions for details.
- Enjoy your first checked bag free on Delta flights.
- Fee Credit for Global Entry or TSA Pre✓®.
- Enjoy an exclusive rate of $39 per person per visit to enter the Delta Sky Club® for you and up to two guests when traveling on a Delta flight.
- No Foreign Transaction Fees.
- $250 Annual Fee.
- Terms Apply.
- See Rates & Fees