American Makes Choice Fares What They Should Have Been When They Launched

When American and US Airways merged, there were plenty of people assuming that the airline would use a blunt instrument to increase revenues; we’d see flights slashed and fares skyrocket. What seems to be happening instead is that the airline is revisiting many aspects of its revenue generation capabilities and tweaking in more subtle ways. The clearest example of this so far? Changes to American’s Choice fares.

When Choice fares launched at the end of 2012, I had trouble understanding how the math worked, but I wanted to give the airline the benefit of the doubt. It now appears that the math didn’t work, and we’re seeing some big changes.

American Airlines Choice Fare Changes

The Choice Essentials fare was $34 more each way over the regular fare. It included 1 free checked bag, priority boarding, and no change fee. That was a pretty hefty benefit for not a ton of money. For an additional $10 each way, you could get the Choice Plus fare which also came with 50 percent bonus miles, free same day changes, and one drink. So the Essentials fare had the meat while the Plus fare was fluff.

It appears that the structure of this has changed dramatically. The price of Choice Essentials has now dropped to only $29 one way, but the change fee benefit is gone.

So now, you get a checked bag and priority boarding for $29 one way. A checked bag is $25 alone, so you’re paying $4 for priority boarding. You probably don’t care about priority boarding, but American figures this would be a good way to get people to prepay for a checked bag and then make a little extra revenue as well. There’s no cost to American to offer priority boarding so it’s just gravy if someone buys it.

Meanwhile, Choice Plus becomes a much bigger draw. It still includes all the fluffy stuff from before, but now it’s the only way to get that change fee waived. And American is now admitting that it was severely undercharging for that benefit before.

The Choice Plus fare is now $51 more per direction, or $80 more than the base fare.

Does this make sense? Absolutely. Will travelers like it? Of course not, because it costs more to get the same benefit. Either the new management team has a very different view of how this should work or a year’s worth of data has given them more ammunition to price this correctly. I’m going to guess it’s a little bit of both, though clearly the new management team is leaving its mark here.

I’d like to think that this is just a first step because it’s not perfect. After all, this Choice Fare product is a very clunky solution. It’s part of the filed fare as opposed to an add-on bundle, so that means it’s subject to the US 7.5 percent excise tax. It’s also very difficult for travel agents to book, even though it looks simple on the airline’s website. Even basic things like how it’s displayed on the website could use some help. (Why is it so hard to determine the value of each line item individually?)

As American continues to push forward on direct connect capabilities, I would think that the airline would pull these bundles out of the filed fare and instead be offered as a dynamic bundle. That would allow for the flexibility to change what’s included in each bundle along with the price. But maybe I’m getting ahead of myself here.

The point in the short run is that American is discovering two things here. First, to tempt people to buy-up at all, American is lowering the cost of the first buy-up level. Sure, the benefits dropped as well, but that’s not as important when it comes to optics. People may be tempted to prepay for a bag and then get that bonus priority boarding for just $4 more. Once American has convinced someone to consider the upsell, then they can offer the big buy-up with the more substantial change fee benefit.

The other thing American discovered is that it was clearly undercharging for the change fee waiver. This should be painfully obvious. Remember, when American launched this, the change fee was only $150. (Choice fares are only available within the Continental US.) Now it’s $200 and the bundle pricing hadn’t changed at all. So clearly this was due for an adjustment.

Is this going to have a huge impact on travelers? Probably not in a meaningful way. But it will allow American to make more money with the assets it has.

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26 Comments on "American Makes Choice Fares What They Should Have Been When They Launched"

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Jared Hanner
Member

I just wish that for those that have status or the credit card that already comes with the bag and priority that you would get the option to just purchase up to choice plus for $51…

MeanMeosh
Guest

The way it works is, you get 1 additional free bag in addition to your regular allowance. If you have the credit card, you’re effectively paying $29 for a second checked bag, and if you have status, $29 for a third. Of course, the Group 1 boarding doesn’t do you much good in either case, but you do still receive the benefit of one extra bag.

Jared Hanner
Member

I didn’t realize that but seriously, how often to people (especially elites) check 2 bags on a domestic flight? Haha.

MeanMeosh
Guest

I think I’ve taken advantage of the 2 checked bags once in all the years I was an AA elite. My entire family was flying to Seattle for a cruise, and since my wife and I both pack light, we took two of their bags to save them the $70 they would have paid for them otherwise. But yeah, in almost 8 years of having that perk, I used it all of once.

A
Guest
Can’t comment with respect to AA but on Delta they give priority boarding away to anyone with the Skymiles Amex card. That puts a someone who can qualify for a credit card in the same boat as a the lower level elite status, i.e. the elite status is devalued. (And suddenly everyone is zone 1 boarding!!!) I like that AA wants to put a value to priority boarding, but it’s only effective if they don’t give it away for free to card holders. In the world of checked bag fees those bin spaces have value and they fill up fast.… Read more »
LT_DT
Guest

Having the AA credit card does give you better boarding, but it’s not entirely free since the card has a $95 annual fee.

Dale
Guest

Those without status might care about priority boarding especially if there is a carry on to go in the overhead. Think of a traveller without status who is carrying on a guitar. Choice Essentials would be just what the doctor ordered to assure a place in the overhead bin for the guitar as opposed to checking it and risking damage such as what happened when United broke a guitar.

Hunter
Guest

Technically, no. A guitar does not comply with the published carry-on size requirements, so purchasing priority boarding doesn’t guarantee you’ll get to carry it on (although we all know enforcement is inconsistent, so it’s really a crap shoot). The only guarantee to that is to buy the guitar a seat.

David M
Guest
I think the guitar bit was mostly an example as well as a way to get a dig at United. I did purchase priority boarding once from AA; I was traveling with a suitcase full of relatively fragile items, so I wanted to make sure I’d have overhead bin space and not have to check it. It was $9 for HNL-LAX-SAN, and worth it for the peace of mind. Of course, LAX-SAN was a CRJ-700 so I had to gate check the roll aboard suitcase for that leg anyway, but at least it was a shorter flight and less time… Read more »
Alex Hill
Member

Actually, technically yes. American specifically allows guitars as a carry-on. From : “Exception: guitars over 45in / 114cm can be carried onboard as your only carry-on item if there is room available to safely stow it in an overhead bin or approved stowage location in the cabin. Please ask at the check-in desk on the day of departure”.

Alex Hill
Member
Craig
Guest
I think the problem with this move is that it so significantly diminishes the value of Choice Essentials that it may prevent customers from getting to a point where they consider the now-far-more-valuable Choice Plus fare. With Choice Essentials, for $29 each way, I get a checked bag and priority boarding. But if I’ve checked a bag (and presumably don’t have a large carry-on), boarding in group 1 doesn’t get me anything significant for the $4 AA is seeking above the checked-bag fee. I’ll be surprised if significant numbers of travelers see enough value in Choice Essentials to make it… Read more »
ORD Rich
Guest

Cranky

Have yet to see a article on the new UNITED carry on
restrictions… Not all Airports doing it yet… United
is enforcing size of carry on effective March 1..
Even trying to have First Class have restrictions..
Businessmen will never go along with this…
Only have seen 1 gate at ORD doing it and
a gate in BOS Nothing on West coast yet..

Carl
Member
These products probably only make sense for non-elites anyway. And at the $80 price point, which I assume is really $160 for a round trip, it’s not much of a savings vs. the $200 change fee. I don’t think they’ll be selling very many at $160, unless it is to a non-elite who knows they will check bags and that the trip is tenuous or has great likelihood of time/date adjustments. I assume this is only a waiver of the change fee, and you still have to pay up for any fare increases, which are likely if you have to… Read more »
jaybru
Member
I check air fares often, daily, sometimes hourly. There are probably better things to do with my life, but transportation prices, particularly air fare ticket prices have been a major part of my life, working and now just for pleasure. Yes, “night coach” fares were a very big deal when CAB finally approved them. “Joint” fares have always intrigued me. But fares like “Choice” fares, however many different “choices” there are, who cares. Well, I know who cares: the airline wanting to sell up and confusing its customers just enough to get away with it. Just the price please, thank… Read more »
George
Guest
Geez Louise!!! After yesterdays article about Sky Pesos and this on this fee goes up, that fee goes down, it is obvious the management of the big 3 is in the hands of Laurel and Hardy, The 3 Stooges, and Abbott and Costello. The airline pricing model is broke-I’ll bet the airlines really don’t have a clue what it really costs to carry a person from Point A to Point B. Some regulars on this board have said it, and I’m beginning to think the are right-reregulate the airlines at least when it comes to fares. And on something totally… Read more »
ABC
Guest

“I would think that the airline would pull these bundles out of the filed fare and instead be offered as a dynamic bundle. That would allow for the flexibility to change what’s included in each bundle along with the price. But maybe I’m getting ahead of myself here.”

Pretty sure this is due to technical limitations which eventually will change.

Alex
Guest

Extracting further revenue from the fare structure seems to be a smart move by the new management. However, I think its far too early to imply that blunt instruments won’t be used to increase revenue. I believe there will be plenty of flight slashing and fare increases in the coming years to the benefit of the airlines and detriment of travelers.

Andrew B
Guest
I thought the original choice essentials was a great deal for a non-elite flyer – I think i have a perfect example. I am a DL elite who needed to fly to GCK – an airline only served by AA. I booked a roundtrip from DCA on AA for a reasonable $279 roundtrip and tacked on the choice essentials, figuring that a.) I was going for a wedding and this way I could check a hanging bag for my suit, b.) I’d have zone 1 boarding (after elites) so I wouldn’t have to worry about bin space for my carry-on,… Read more »
malbarda
Member

So… for $29 I get to check my bag and board with priority. But what is the point of boarding with priority if I don’t need overhead bin space for my bag?