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Back in February, American Airlines and United launched basic economy on the exact same day. Since then, the two airlines have taken drastically different approaches. While it’s since scaled things back, United was quick to roll out basic economy to a vast number of its routes — while setting up its basic economy fares to be available on all economy bookings, no matter how expensive.
Meanwhile, American Airlines has taken a much more measured approach. At the launch in February, AA only started with basic economy on 10 routes, increasing to just 25 routes three months into the program. Since then, AA has accelerated its pace, expanding to 69 routes — including to/from Canada — in mid-June. Just in the last few weeks, AA increased the number of affected routes to 78. For all of these routes, AA has only offered basic economy when there are discount economy tickets available — unlike United’s shocking basic economy pricing (before the recent update):
But, it seems like the slow-and-steady pace is history. In this morning’s investor filings, we found out that American Airlines management expects to have basic economy on all domestic routes by the end of September.
Last quarter, we found out that half of AA passengers given the choice between basic economy and paying more for standard economy chose to pay more. Well, it seems that these stats are still holding true. As noted in the 8-K: “Early results continue to be in-line with initial expectations, with approximately half of American Airlines customers buying up to Main Cabin when given the option between that and Basic Economy.”
Of course, this is presented as a positive to the investors — who’ve been promised $1 billion of additional annual revenue from the same number of seat-miles from “cabin segmentation” (i.e. basic economy and premium economy). After all, despite what the airlines have suggested about basic economy fares being about “customer choice,” the airline’s true motivations are presented to investors: to charge more for the same amount of service as before.
When it came to question time during the investor conference call, a financial analyst pushed the airline reps for why it didn’t have a basic economy option for expensive, last-minute bookings like United. The analyst wondered why the airline wouldn’t try to up-sell last-minute business travelers. In response — while they aren’t sharing any details — AA management hinted at adjusting the way it sells basic economy over the next few months. It seems that it might not only be the discounted economy fares that are impacted anymore.
So, it seems that we’re up for an interesting couple of months for American Airlines basic economy! If you’re looking to fly domestically in the next few months — and your route isn’t already affected by basic economy — you might want to book your flights before that route is hit by the fare increases. Or, you can get an American Airlines co-branded card to defeat many of the negative aspects of basic economy.
Know before you go.
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