With the imminent launch of Basic Economy on both United and American, we are on the cusp of a massive change that will impact anyone who buys travel in the US. While I personally agree with the strategy behind Basic Economy, there’s one thing that I just can’t stand: the inability to add back amenities after purchase if you change your mind.
The idea behind Basic Economy is relatively simple. There are two things that drive air travel purchase behavior more than anything else: price and schedule. And for many people, price is the most important factor by far. The ultra low cost carriers (ULCCs) have seized on this by cutting out frills and offering an incredibly low base price. The demand is clearly there as the ULCCs continue to grow despite the general level of hatred directed their way (in the US, at least).
The Big 3 (American, Delta, and United) in the US initially tried to ignore them. That didn’t work. So then they tried to match them. American became the most aggressive at matching after the US Airways merger, and it had the desired effect: Spirit shut down growth in Dallas/Ft Worth. But there was a problem. It wasn’t sustainable or profitable.
To match those lowest fares, the Big 3 had to offer their full product. Of course, the base product has eroded over the years, but it is still far more than the ULCCs offer for that same price. There were experiments to try matching the ULCC fares at a level of base price + carry on bags, but that didn’t work quite as well even if most people were carrying on bags and paying the ULCCs to do so.
So the decision was made, first by Delta, to create Basic Economy. The various implementations have been slightly different. Delta allows carry-on bags while the other two don’t. But there’s one thing in common. If you buy Basic Economy, there’s no way to pay to get a higher level of product if you change your mind. And that to me is the fatal flaw.
ULCCs will let you buy anything and customize your product. That’s nice, but it’s also gone too far in the other direction. There are so many options that it confuses and overwhelms travelers. That’s why we’ve seen the return to bundling. Frontier in particular has done a good job of that with “The Works” that can be purchased at the time of booking. But people who still want to piece their product together can do it if they wish.
The Big 3 have made this impossible in Basic Economy, and at least some of them are doing it on purpose (the others are stymied by tech issues). They want to make Basic Economy so unattractive that the only people who will buy it are those who truly care about price and nothing else. No advance seat assignments, no changes, no carry-on (on two of them), etc. This feels punitive and it’s not good business.
What they should do is let you add on what you like. Now if you buy Basic Economy and then decide you need or want a carry-on, what can you do? Nothing. You have no option but to check a bag. People buy tickets far in advance, and their needs change. If the fare difference between Basic Economy and regular coach is $25 (random and not grounded in reality), then why not let someone pay for a carry-on online at any time before day of departure for $30? The airline still ends up making more money and the customer doesn’t feel so locked in.
American has given a nod to this by allowing people to pay for seat assignments 48 hours before travel if they want. But even that isn’t enough. It’s hard to know if a seat will be available so close to departure, so it adds stress to the situation.
Eventually, the way the ULCCs and the Big 3 price should converge into something better. There should be multiple tiers that are well-explained to allow people to just choose things off the shelf as they please. But then travelers should be able to modify as they want later.
My assumption is that the Big 3 are hamstrung by technology, as is always the case. But for some (not all), I think this is more than technology. It’s part of the strategy. This is a way to create gigantic fences to separate the truly price sensitive from everyone else. That sounds good in theory, but in practice, customers won’t like feeling trapped. I hope the Big 3 rethink this part of the strategy in the future.
