June 14, 2017
Bloomberg confirmed last week that the new Basic Economy fares have been hugely profitable and this new fare class is worth at least $1 billion in additional revenue.
Notably, this ‘lowest’ fare offering – which slashes services for the old price while raising the Economy fare – tends to raise your overall cost, because you get coerced into into paying more for your ticket.
If you think this sounds like replicating budget airline conditions, you’d be right.
We used to hold legacy carriers to a higher standard not that long ago. When a bare-bones Basic Economy class would never happen. Now, it’s “pay up or shut up”.
Among its many charms is that you can’t select seats until you check in, families are not able to sit together, you board last, no upgrades, no overhead bins and no earning mileage credits towards status.
Selling fear and uncertainty is a timeless strategy to increase sales. Customers are willing to pay more for a normal economy seat if there is something worse available, like Basic Economy.
Welcome to the Huckster Airlines of America
Today, Basic Economy fares have spread like the plague throughout the US major carriers and nearly every cheapest US airfare is Basic Economy.
It is also the flight class that Expedia and other web portals will automatically book you on by default – so beware!
This highlights again that the airline industry is in a race to the bottom and without regulation or more competition, we’ll just see more of this.
The government could also remove regulations that prohibit foreigners from owning US-based airlines. That way, foreigners like Richard Branson can start a US-based airline and create more competition in the industry. Additionally, if regulations are dropped against foreign carriers (like Cathay Pacific) from operating US domestic flights, it’d increase much needed competition.
What’s next in the airline sales – flight protection from being beaten up?