Basic Economy Will Become An Industry Norm

Enter Basic Economy

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Airline trends come and airline trend goes, but there is one phenomenon that will be growing, not shrinking, over the next several years: the move to “Basic Economy.”

Basic Economy (BE) is a Delta fare class that was established to compete with the ultra-low cost carriers (ULCC) like Spirit and Frontier, which sell you a ticket but nothing else. No seat assignment, no free bags (carry-on or otherwise), no free Diet Coke. All those “amenities” are sold as add-ons, meaning that the base fares are very low. The network carriers found themselves with a problem: They had to compete on the base price of the ticket, but they had none of the add-ons. Enter BE.

On Delta, a Basic Economy ticket is cheaper, but it comes without a lot of the perks that you take for granted. No seat assignment and you board after everyone else. No changing your ticket, even for a fee. If you have elite status, no free upgrades. You’ll still get your free Diet Coke, but that’s about it.

I bring this topic up because United and American will be rolling out their versions of BE later this year. Over time, I expect the characteristics of the fare class to change, but the concept will remain the same. Right now, most airlines will show you some version of prices for Economy, Premium Economy, Business and First. Within those fare classes, the buckets are further differentiated. As one bucket sells out, the price goes up. I expect them to start introducing the BE category, as well, on their websites. It will be fun coach seats without all the little extras that make a flight so pleasant. I also expect the fares to get rolled out in more than just the markets in which they compete with ULCC.

What to Know

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As the product gets rolled out across the country, keep in mind the following:

Basic Economy is just a pricing strategy. You’re buying the same seats as someone who purchases a regular economy ticket. Only a certain amount of BE-priced tickets will be available on any given route, based on the airline’s anticipated demand.

If you need to sit together (e.g., You are traveling with kids.), pay for the regular economy ticket. Please. Flights are so full these days that you’re likely to end up with four middle seats, otherwise.

There will be a major issue with corporate accounts. Many businesses require their employees to fly the lowest available fare on any given route. While the airlines will offer a way for companies to “turn off” BE fares on their corporate travel sites, not all will.*

The Bottom Line

The bottom line is that the passenger is increasingly becoming as important as the fare they paid. Airlines have finally started to make some money, and they like the feeling.

 

*Forcing employees to fly Basic Economy would be a penny-wise, pound-foolish move for most companies. People aren’t stupid. Instead of booking a BE fare far in advance of their trips, employees will start waiting until the last minute to book to ensure that there are not BE-priced seats left. Those last-minute tickets will end up costing employers more than they would have paid for a regular economy ticket booked ahead of time.

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