In a case of “follow the leader,” the third and fourth largest U.S. airlines have adopted a new fare class designed to boost profits. Number 3 American Airlines and number 4 United have emulated number 1 Delta by introducing a new “Basic Economy” fare class designed to offer cost savings to passengers by further limiting features included with standard economy class seating.
Here’s a warning to the wise: pay special attention to the “small print!” JTB USA Business Travel advises Business Travelers and Travel Managers to carefully consider costs versus reduced benefits to determine if the lower fares are really worth the reduction in services and potential hassles from other restrictions.
Meanwhile, number 2 Southwest Airlines early this year announced that it was not going to follow Delta’s lead, based on not wanting to change passenger expectations about its brand. “Any time we contemplate offering customers a choice, we debate that heavily because complexity drives confusion and it clouds the brand,” said Southwest CEO Gary Kelly during a January conference call to discuss the airlines earnings.
Delta Airlines was the first to initiate the “Basic Economy” fare class in select U.S. and international markets back in 2012 as a trial run to test customer response. In 2015 they expanded implementation to most markets in its current format. American and United Airlines both introduced their new Basic Economy fares just last month. The major carriers adopted the new fare structure in response to rapidly growing competition from ultra-low-cost discount airlines, such as Allegiant, Frontier and Spirit. These carriers charge low fares, but then add fees for a wide range of standard features already included in most airlines’ economy fare class.
For example, a recent Basic Economy fare from United offering round trip travel from Minneapolis to Denver was listed at $136, $40 less that the standard economy fare. The same flight on discount carrier Frontier Airlines came in at $88, which represents a substantial savings. While added frills are going to up the cost of both the discount flight and United’s Basic economy fare, Frontier’s fees for these frills generally run higher, and there are more of them:
- Pick your seat— Frontier: $6 per flight / United: n/a
- Seat upgrades— Frontier: $15 to $100 / United: n/a
- Checked bags—Frontier: $20 for first; $30 for second / United: $25
- Carryon bags that don’t fit under forward seat— Frontier: $30-$35 / United: $25
- Gate-checked bags—Frontier: $50 / United: $25 with advance notice, $50 without
- Soft drinks & snacks—Frontier: $2 to $3 / United: free
Thus, with a few added frills, the cost of the Frontier flight can catch up to the cost of the same Basic Economy flight from United.
A breakdown of the fares, restrictions and reduced benefits
These Basic Economy fares are $20 to $40 cheaper on average per round trip than standard Economy fares. The reduced features and added restrictions are essentially the same for all 3, with 1 notable exception: Basic Economy ticket holders on United and American are not allowed to stow carryon baggage in the overhead bins, while Delta’s Basic economy fare comes with no such restriction.
American and United Basic Economy ticket holders will be charged both the standard checked baggage fee plus a $25 gate service charge if they show up at the boarding gate with a personal item that will not fit under the seat in front of them.
All 3 airlines’ Basic Economy fare include the following restrictions:
- Non-refundable and non-changeable tickets
- No advanced seat selection
- No paid or complimentary upgrades
- No same-day confirmed
- No same-day standby
- No same-day flight change
- Last to board
As always, membership does have its benefits
Some of these restrictions are waived for the airlines’ mileage membership and credit card program customers, depending on the level of membership and other factors. Additionally, Basic Economy still allows for mileage accrual in these programs, though at reduced mileage and awards for some program levels. Basic Economy ticket holders also get the same seats, free soda and snacks, and any other amenities offered in the main cabin.
Business travelers and travel managers can purchase Basic Economy tickets much the same as any other fare class, whether by the airline website, airline reservation agent, or through a travel agent. The new fare is not offered in all markets, and the markets where offered are subject to change. American is currently offering it in only 10 markets, while United’s Basic Economy service begins April 18. Delta, with a big head start, offers the fare for 100s of its markets, and plans to continuously expand upon that number.
The Bottom Line: Is the potential hassle worth saving a few dollars?
While the overhead baggage restrictions may represent enough disincentive for many business travelers, the non-refundable, non-changeable, and no flight-change clauses will ward off those travelers whose business requires flexibility and ease of changing travel plans. In short, Basic Economy class fares are probably only feasible for business travelers and travel managers whose companies’ budget mindedness takes priority over travel flexibility. Additionally, such budget-minded business travelers who cannot travel exceptionally light with their carryons, should probably restrict their Basic Economy fare search to Delta for the sake of that overhead stowage.
P.S.: No word on whether the major airlines’ strategizing on the Basic Economy fare considered following the lead of Irish discount airline Ryanair, which became notorious for its planned restrictions on in-flight toilet usage. But here at JTB USA we doubt it, given the warning shot fired by the U.S. Congress with its bill—Comfortable and Fair Flights Act of 2015—that would prohibit airlines from charging in-flight toilet usage, and require aircraft to have “an adequate number of functioning lavatories.”