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Back in February 2017, American Airlines first launched basic economy. Since then, the world’s largest airline has expanded the no-frills ticket option nationwide and even into Canada. First presented as providing customers a “lower cost option,” it was marketed by AA as a customer-friendly move.

Throughout the rollout, we’ve seen that this isn’t the case. Fares haven’t dropped. Instead, customers are having to pay more for the same “Main Cabin” experience than they used to. Basic economy fares have generally matched the old economy fares on many routes. Even worse, AA hasn’t lived up to its promise of matching low-cost carrier fares with its basic economy fares, meaning that passengers are having to pay a premium for a similar experience — even though American Airlines likes to tout differences between the two.

AA Basic Economy vs Main Cabin vs LCC comparison

Thursday, at American Airlines’ Investor and Media Day, AA’s President Robert Isom admitted what we have all noticed to be true: “Basic Economy is not a price cut,” he said during a presentation.

IMG_20170928_091045
Before the product segmentation project, passengers had three options, with a large gap between

American Airlines is saying that, as part of product segmentation, basic economy fares fill the old role that Main Cabin used to have.

Product Segmentation Appeals to Broad Customer Base

Of course, the fact that basic economy isn’t cheaper isn’t news or that surprising to those who follow The Points Guy. After all, we reported in January that American Airlines was projecting $1 billion per year in incremental revenue from basic economy and premium economy.

However, this marks the first time that we’ve heard American Airlines admitting that basic economy is in fact a price increase, and spinning it as a positive for investors and passengers.

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