Sign of the Apocalyse: American’s Cheap, Refundable Long-Haul Fares

American, Fares

It was a big enough shock to see airline change fees start melting away, but now there’s something even stranger happening. American is experimenting with affordable, refundable fares on long-haul flights. I suppose we’re at the point where airlines will do anything to try and stimulate demand.

American quietly loaded the fares for sale starting on August 24. It looks like the deadline was extended, but they are now going through September 30. Here’s what the airline says about them:

  • Fares are refundable minus a $100 “administrative fee”
  • Does not apply to Basic Economy
  • Valid for purchase on itineraries from the US to all long-haul markets as follows:
    • Atlantic: EU, UK, Norway, Switzerland, Iceland
    • Latin America: Argentina, Brazil, Chile, Peru, Uruguay
    • Pacific: China, Hong Kong, Japan, South Korea
    • Oceania: Australia, New Zealand

What does this really look like in practice? Historically, refundable fares were absurdly expensive. So, let’s just take a look at Chicago to London to see how this breaks down. If you go to aa.com, you see this:

Now, ignore those exact prices. That assumes you’d take a horrible overnight connection on the return to save a few dollars. I instead looked at the 10:50am return on March 17 heading straight back to Chicago which was a bit higher. But do notice that all these fares are “flexible” except for Basic Economy. It’s not entirely clear what that means to an average traveler since it could just mean that change fees are waived. But, I was able to dive in using Sabre.

I decided to price this as it would have been sold on August 20 and then again on September 25. Here are the results using published fares. (We had some private fares that were discounted, but I’ve ignored those and focused on what you’d find on the AA website.)

Fare TypeFare on Aug 20Refund Fee on Aug 20Fare On Sep 25Refund Fee on Sep 25
Lowest Basic Economy$625.15n/a$619.55n/a
Lowest Main Cabin$755.15n/a$749.55n/a
Lowest Refundable Economy$4,108.15$0$748.55$100
Fully Refundable Economy$4,108.15$0$4,280.55$0
Lowest Prem Econ$1,200.75n/a$1,189.75$100
Lowest Refundable Prem Econ$5,592.75$0$1,189.75$100
Full Refundable Prem Econ$5,592.75$0$5,582.75$0
Lowest Business$3,650.75$275$3,640.75$100
Fully Refundable Business$15,500.75$0$15,490.75$0

There is quite a bit to unpack here. First, ignore the slight fare differences in some of these. If you see a $10 fare difference or less, it’s probably currency fluctuation on taxes and not indicative of any actual change in the filed fare.

The easy part is Basic Economy. That doesn’t change, and it remains American’s way of saying “no checked bag for you.” It’s non-refundable as well.

But then take a look at coach. You might be doing a double-take wondering how the lowest main cabin fare is actually higher than the refundable fare. I’ll take “stupid legacy things airlines do for $100, Alex.”

Airlines still file fares like they did in the old days, but as different “types” of fares began to exist, they had to figure out a way to shoehorn the new structure into this old system. Behold, the branded fare family. Every airline has its own families, and for American in coach, these are the three options:

  • BASIC – Basic Economy
  • MAIN – Main Cabin
  • MAINFL – Main Cabin Flexible

So, what basically happened here is American left the MAIN fares alone and then filed the refundable fares under MAINFL, some at $1 less than MAIN. That means if a travel agent is specifically looking for MAIN to avoid getting Basic Economy, they might completely miss that there is a cheaper fare with more flexibility.

But I digress. You can clearly see that the old refundable fare was so absurdly high that it would have been hard to sell much of it. Now, with only a $100 penalty, it makes selling refundable fares a whole lot easier.

But this isn’t just about economy. It’s the same dynamic in premium economy, though without the $1 difference. And in business, it’s even more interesting.

Business class fares were refundable with a penalty in these markets. Instead of filing a new fare, it looks like American effectively just changed the tariff to say that it’s refundable minus $100 instead of minus $275, the old regular fare.

The question, of course, is why would American do this? The answer is obvious, especially if you look at the new purchase page.

Americans still can’t travel to any of the countries listed here. Ok, ok, you can travel to the UK with a 14-day quarantine, but that doesn’t really count.

Of course, you may not be able to travel now, but that doesn’t mean by next summer you won’t be able to go. The problem is, people are gun-shy. They don’t want to buy tickets and not be able to go, so they just won’t make a commitment this early. But would you make that commitment if your only risk was a $100 fee? You might. I might.

That’s clearly what American is hoping will happen, and it’s why I assume this has an expiration date. If it does the trick, American may extend it. If not, well, it was a nice try to get some reservations on the books.

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23 comments on “Sign of the Apocalyse: American’s Cheap, Refundable Long-Haul Fares

  1. As you imply, Brett, regular travellers are being put off from booking predominantly because there is nowhere that will allow us in (without significant restrictions), not really through fear of health safety. I am now two months late in relocating to the US to start a great job, partly due to the freeze on H-1B, but mostly due to the fact that I can’t get in to the country. When things ease up a bit at the government level, the airlines will get their wish (probably). Having said that, $4k for an unrestricted economy fare has always been a complete pisstake.

  2. “The question, of course, is why would American do this? The answer is obvious, especially if you look at the new purchase page.”

    They are desperate to fill seats at any cost.

    “Of course, you may not be able to travel now, but that doesn’t mean by next summer you won’t be able to go. The problem is, people are gun-shy. They don’t want to buy tickets and not be able to go, so they just won’t make a commitment this early. But would you make that commitment if your only risk was a $100 fee? You might. I might.”

    That depends on if we decide to bight the bullet & take this pandemic seriously as other nations already have done, but until that moment arises we will be closed off from most of the world.

    1. Sean,
      I will make just one post about covid since it isn’t the primary topic of this article but your last sentence intrigues me.
      Given that other countries including in Europe have higher per capita death rates than the US and airlines in Europe as well as other parts of the world have cancelled roughly similar amounts of capacity as US airlines, what would you do differently SPECIFIC to the airline industry and what impact would your actions have on American since they are the focus on this article?

      1. Read Matt D’s, Chase’s & FrequentFlyers responces below & this part in particular.

        “We now see the long-term effect of this: travelers are now VERY hesitant to buy a plane ticket, lest they once again hand over their hand-earned $$$ to an airline and, due a unforeseen circumstances (e.g. a spike in the virus prevalence, state-level travel advisories, other countries shutting their doors to Americans) find themselves unable to travel but also unable to a full refund of their ticket. Been there, done that, not doing it again.”

        This is what AA & other US airlines are dealing with & it has nothing to do with Covid’s death rate witch you are applying far to much energy towards. Also reread my above post.

        1. I don’t disagree with the general theme that airlines are trying to aggressively discount – in this case using the dates in CF’s graphic – well into 2021 for AA’s international routes.
          I also agree that people are afraid to travel and each person is free to make their own decision about how they perceive their risk and respond accordingly; airlines are simply selling a service that some people are continuing to buy but obviously far fewer than normal. In the US, there have been a few days at about 40% of last year’s demand but more lower than that.

          My point is that other airlines worldwide have cancelled roughly the same amount of capacity; some Asian airlines appear to be worse. US airlines, despite having a large domestic market are not adding much more capacity than European airlines.
          The greatest virus impact has been in Europe and the Americas but we are in a global travel crisis and I don’t see any airlines outside of China that are doing substantially better than others.

          That said, I don’t know if other airlines are matching what AA is doing.

          It would seem that the economics of long-haul travel fall apart if what AA is doing becomes a long-term part of their fare system.

          If it is simply that they are trying to fill seats right now even as they reduce capacity, then their strategy seems more of a short-term, airline-specific attempt to raise cash.

          The long-term implications for the industry are very different depending on which is happening.

  3. Just a question, CF, since you did the research here, have access to a GDS, and also wrote about AA’s massive international capacity cuts yesterday.
    Are these fares still there and being sold to the same degree as they were before AA pulled down their international schedules or did they file these very low fares and then later decide to pull down capacity?

  4. U.S. airlines made a short-sighted mistake in Spring 2020 when the pandemic struck American shores. As we all know, travel demand collapsed, borders were quickly closed, and countless people sought plane ticket refunds. But the airlines, seeking to conserve cash, were generally stingy about providing refunds, some going so far as to violate DoT rules about refunding money for cancelled flights. Credits — not refunds — were provided to many folks, even when (unbeknownst to them) in many instances they were entitled to get their money back. Some people were left in the lurch, many others could only get a credit after much time waiting on telephone hold with airline service reps. The bottom line is that after the virus struck and upended everyone’s travel plans, the airlines made it hard (if not impossible) for people to get their money back. NOBODY wants to go through that again.
    We now see the long-term effect of this: travelers are now VERY hesitant to buy a plane ticket, lest they once again hand over their hand-earned $$$ to an airline and, due a unforeseen circumstances (e.g. a spike in the virus prevalence, state-level travel advisories, other countries shutting their doors to Americans) find themselves unable to travel but also unable to a full refund of their ticket. Been there, done that, not doing it again. My family and I are dedicated travelers, flying approx. 4 times per year on various trips and vacations. I am now totally unwilling to book tickets for my family and then perhaps find myself stuck with a $1000-2000+ “in store credit” that has an expiration date.

    1. I didn’t have to ask for a refund this spring but I don’t think that’s what is holding people back from booking flights, rather it’s the fear of the unknown. That’s what AA is trying to quell. You can roll the dice and gamble on a trip and should another Covid outbreak happen or increased travel restrictions happen you can get your money back…well most of it anyway. Not sure it will work as intended. Most of the world still has 14 day quarantines in effect. Staying holed up in a hotel for two weeks isn’t how anyone wants to travel. Not like the tee-vee is better in Europe.

      For better or worse Florida dropping all restrictions has made themselves the guinea pig for the globe. They have a big enough tourism market, that we will have some real data very shortly. The Sunshine State has size that dwarfs the experiments called South Dakota and Sweden. If there is not a massive outbreak from FL reopening I think the walls will start to fall on the restrictions. Depending on your view it might be a good time to gamble and buy that AA flight for a few months out.

    2. Bingo, we have a winner! Personally, I have only been booking tickets for next year using miles due to how the airlines behaved when the pandemic struck. These companies are not trustworthy now, and have a long way to go to build back that trust.

    3. FrequentFlier – It’s not fair to lump all the airlines in this together.
      American was actually one of the best when it came to giving refunds. It was really United and to a lesser extent JetBlue that played games and got themselves in trouble. Of course, that’s what the new covered, so it gave the impression that all airlines were screwing people over. I really blame United for that situation.

    4. Bingo FF. Bulls eye nailed it.

      I might even take that one step further.

      Often times, fire sales like this are a precursor to a BK filing and this is a last ditch effort to raise some cash. People aren’t so dumb now. If people buy tickets amid all this uncertainty, and the airline files Ch11 (or worse, goes under), there’s a very real chance that ticket holders, as unsecured creditors, so to speak, will get burned anyway.

      Like you said. We got bit once. Not chancing it again.

      1. To fair, you can theoretically get your money back from your credit card company if you book a ticket on an airline that then goes bankrupt. Admittedly, however, even if you did get your airfare back, it would probably ruin your day and throw your plans into disarray, plus there might be other nonrefundable services you’d already booked that you’d have to take a loss on.

  5. So RE refunds: The bet is you can travel next summer freely. I’d put that at 50/50. If you can’t I guess the money will be rolled over as a credit, or you can loose the $100 and get your money back. For me the catch is I am thinking demand will still be garbage well into 2021. Why shell out the money now when these $750 transcons are going to be still around most likely? I think in a normal market this would be a great way to simulate demand, but we are far from normal. If something is a fire sale (say for me LAX-NRT R/T for say $600) I might bite. Otherwise I’ll keep my powder dry and see what happens during flu season.

  6. I was looking to buy a R/T trip to Mexico and was offered an upsell to the flexible (refundable) fare for $50 (on a $600 fare) in the same page they normally try to upsell you to business class. I wonder if it’s related.

    Didn’t see anything about a $100 fee on that one, but I might have missed it.

    Also, basic economy wasn’t offered. I’ve also not seen it in other searches lately. AA seems to be experimenting something around BE too.

    1. Carlos – American has dramatically scaled back on Basic Economy in short-haul markets, including Mexico. But on long haul, they’re still in full force primarily because they’re the only fares American has that don’t include checked bags on long-haul.

  7. FWIW, it’s interesting to see airlines attempting to be “creative”. Desperate times, drastic measures.

    I’m still holding out for REAL sales in J. They’d be able to “borrow” more of my $$ than a cattle car ticket and I’d be happy to “gamble” on some version of future sanity allowing me to again travel the world.

  8. Brett,

    A number of airlines and hotels were “difficult” to deal with in getting refunds. Some were violating laws, some were violating their own terms. A few changed midway through this crisis but have any penalties/fines been doled out to those that blatantly violated laws/rules?

    I know Canadian airlines were clearly ignoring laws that applied to them. I think several European airlines gave people the finger. Etc.

    And yeah, why would anyone buy a ticket to some place that currently don’t allow Americans to visit (much of the world, especially in Europe)?

    Finally the situation hasn’t really improved much in the US. Just the hotspots differ. AZ is much better off now but much of the midwest is doing worse on a per capita basis.

    And just to think this time last year airlines were probably still trying to deal with shortages of pilots.

  9. Cranky, with the schedules always being in a state of flux how do we know that AA isn’t just using this ticket revenue for a cash float? They could remove these flights and then take their time refunding the payments. Remember this is Parker we are talking about.

  10. I actually booked a ticket 15 hours before departure ICN-CLT through DFW. Mom had heart attack and I had to rush back to the US (she’s ok now).

    $750 TOTAL and ICN-DFW was in premium economy. 1.5 hr layover to CLT. On the way back I did have to overnight in DFW just 12 hrs total.

    Had I not flown premium one way, it would’ve been 180$ cheaper.

    And even at check in to come back to Korea – they offered premium upgrade for only $180!!

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