It’s only been a couple of months since United started selling Basic Economy fares, but the availability has grown rapidly. Unlike American, which seems to be taking a methodical approach, United tried it, liked it, and then put it pretty much everywhere in the US (except Hawai’i). I suppose that’s not entirely surprising with President Scott Kirby at the helm since he’s a true believer in the product, but what I find most interesting is how things have changed since it first launched. There are a couple of surprises here.
Let’s start with a refresher. United now prices Regular Economy at a fixed amount above the Basic Economy fare. Here’s a modified version of the chart I rolled out to examine how United was pricing each of the first 7 routes from Minneapolis/St Paul to its hubs. (The modification was just to remove a couple columns that are irrelevant to this post. See the original here.)
| City Pair | Spread Between BE and Economy | Spread Between BE and Economy Flexible |
|---|---|---|
| Minneapolis-Chicago | $15 | $5 |
| Minneapolis-Denver | $20 | $5 |
| Minneapolis-Houston | $20 | $5 |
| Minneapolis-Los Angeles | $25 | $5 |
| Minneapolis-Newark | $20 | $5 |
| Minneapolis-San Francisco | $25 | $5 |
| Minneapolis-Washington | $20 | $5 |
As you can see, the spread between Basic Economy and Regular Economy was roughly distance-based with the longer flights having Regular Economy as a larger bump over the Basic Economy fare than shorter flights. For the Economy Flexible fare, however, it was a flat $5 bump over Basic Economy.
I figured they’d review this and make changes after bookings started coming in. Sure enough, there have been a couple of tweaks that may or may not give us some insight into how this is performing.
The Spread Between Basic Economy and Regular Economy Has Shrunk
It does look like United has kept the same basic $15/$20/$25 each way sell-up from Basic to Regular, but it has changed the mileage bands it’s using to determine which ones fit in which bucket.
| Distance | Spread Between Basic Economy and Regular Economy |
|---|---|
| < 1,200 miles | $15 each way |
| 1,200 – 2,000 miles | $20 each way |
| > 2,000 miles | $25 each way |
This means that the spread in all of the original 7 Minneapolis markets has dropped by $5 each way, except for Chicago. Denver, Houston, Newark, and Washington are now $15 over the Basic Economy fare while LA and San Francisco are $20 over the Basic Economy fare.
It’s hard to read the tea leaves on this one. On one hand, we could guess that on the mid to longer-haul flights, people thought the spread was too much and weren’t buying up enough to Regular Economy. On the other hand, it could also be that when they expanded this to nearly all domestic markets, they just arbitrarily decided the best mileage cutoff for each split and that was different from the original test. I’d like to think it’s the former, and United is trying to learn from historical buy-up data. But in reality, I doubt that’s what happened.
The Spread Between Basic Economy and Flexible Economy Has Disappeared
One of the things that really bothered me about the initial roll-out was that United decided to sell a Basic Economy fare at all times, even if there was only one seat left on the airplane. That meant you could have been looking to buy a $2,000+ roundtrip full fare ticket, and Basic Economy would still price as the lowest available fare. So there was a very real possibility of someone buying a last minute ticket for $2,000 only to find it non-refundable, non-changeable, ineligible for an advance seat assignment, and disallowing carry-on bags. To add insult to injury, the spread was only $5 each way. That meant if people had only paid attention (or known they had to pay attention), $10 would have made all this go away on a roundtrip. It was a mean-spirited strategy that provided almost no revenue benefit. And now it’s gone.
Well, technically, the fares aren’t gone. There are still insanely high Basic Economy fares (that require a roundtrip) filed, but they are now equal to the Economy Flexible price. It’s the flexible fare that appears to be the one that auto-prices every time.
Again, it’s hard to read the tea leaves. On one hand, the airline could have received vicious feedback from burned, high-dollar customers, and backed off. On the other hand, someone with a customer service brain may just have won the battle to not be terrible when someone is buying a high fare. Regardless of the rationale, it’s nice to see some common sense win the day on this one.
With the structure now likely set, now we get to see if more people begin the like Basic Economy over time. There continues to be a lot of whining about the introduction of Basic Economy at all, but it’s not going anywhere. And some people may find they like it when they’re actually flying.
United says that about 30 percent of people are buying Basic Economy while the rest buy up. Of those 30 percent, some are elites and some have the credit card, so they can still bring on a carry-on bag. But if you assume that even just 15 percent of people are no longer carrying a bag, that’s a big decrease in the number of bags that need to go into the overhead bin. I’ve heard a mix anecdotally but it’s still early with many summer travelers likely having bought tickets before this rolled out nearly-nationwide. It’s a benefit that may not truly show its colors for a couple more months, but it may be something that can help soften the perception that Basic Economy is awful.
