American Airlines’ Bizarre $16 Fares

Filed Under: American, Travel

I’m going to write about an airfare deal not because I think people should take advantage of it (quite to the contrary, they shouldn’t — stay home, people), but rather because I find this pricing strategy to be rather unusual.

With demand for travel having decreased exponentially, we’re generally seeing airlines take two pricing strategies:

  • Some airlines are more or less maintaining “normal” fares, realizing that sales won’t generate much incremental revenue at this point, since people aren’t flying
  • Some airlines are offering huge discounts on fares, I guess because demand is virtually non-existent; is this purely a competitive response to other airlines, or are they actually hoping to generate demand?

While I’ve seen a lot of low fares, American’s fares between Miami and Los Angeles are the most ridiculous I’ve seen yet. Through the end of April, American is selling one-way tickets between Miami and Los Angeles for $16. That’s right, you could fly roundtrip coast-to-coast for $32.

If you want to avoid basic economy, the fare is three times as much.

These fares are only available through the end of April, and then as of May fares skyrocket all the way up to $28.

This isn’t just available for one day, but these fares are available just about every day, on most flights.

Just to further point out how low that $16 fare is, $4.50 of that is the US Passenger Facility Charge, and $5.60 is the security fee, so in reality the fare is only $5.58 (though US airlines are getting some relief with taxes, so some of that is still going to the airlines).

Yep, a $6 base fare with no fuel surcharges for a flight that’s about six hours…

Yeah, I get there are sometimes airfare quirks, though I can’t really wrap my head around this strategy of pricing flights this way:

  • People shouldn’t be encouraged or tempted to fly right now, for everyone’s sake
  • I’d be surprised if this fare even covers the incremental cost of carrying additional passengers

Yeah, we’ve seen a lot of fares, but American Airlines is in a different league with these fares, in my opinion. To me these ultra-low fares for April seem counterproductive…

What do you make of American’s $16 transcon fares?

Comments
  1. Aren’t airfares controlled by algorithms? It makes me wonder if these specific fares were set by a human or a computer, and if it was a computer, whether its programming considered this type of scenario.

  2. Or maybe American is playing its part in the circumstances – assuming only those who need to travel are travelling, then this is basically a free fare for essential travel.

    I know – each of those is probably an assumption too much!

    My first reaction was algorithms at boundary conditions too^

  3. Maybe AA’s revenue management is just trying to see how low the price needs to be in order to incentivize some idiots to travel in the current climate.

  4. I would fly right now and especially with these fares but the problem is that nothing is open when you get to where you are going. You can’t even go for a hike or visit the beach.

    I doubt they are this smart but maybe offering super low fares will result in statistics later that show something like “fly American the lowest fares on average on every route in the USA” or whatever.

  5. Assuming that you have already had Corona, are not contagious, and possess antibodies, this might make for an interesting time for mileage runs. Of course you run the risk of American shutting you down and confiscating all your points for gaming their system by flying in a pandemic. Yeah, American really might try something stupid like that if you try something stupid like that.

  6. Yeah, I just think that the algorithms are matching based on market prices, no. of seats taken, etc. On UA, BE is $18 EWR-FLL as well. Basically $30 for First Class if you get CPU’d.

  7. Given the two new studies out this week showing significantly lower risks than many were fearful of (Oxford, Stanford) and the Imperial College study, the one widely in the news two weeks ago with 2-3 million deaths in the US, drastically lowering their death estimate by “at least” 96% this week (which did not get any US publicity, only in the UK), I’d be happy to fly somewhere if things were open.

  8. @Pat
    Usually by algorithms from the pricing model. However, these super cheap fare should not be any of those original fare buckets. Therefore their analysts must have created these super cheap fare buckets manually.

  9. @ AlohaDaveKennedy — Credit the flights to BA. 20 TP per segment. Just 75 segments x $18 = $1,350 for Gold.

  10. @ AlohaDaveKennedy

    Not to mention about the potential possibility of infecting someone else on your flight/taxi/airport, there are already reports of “recovered” patients being infected again, what are you thinking?!

  11. Qatar airways is one of a few airlines operating out of Europe to Asia with almost empty airplanes but they substantially increased the fare because they are not facing any competition and only the people who really need to travel would buy their ticket. It’s pretty nasty in my opinion. Maybe American is doing the opposite but I still don’t understand how cabin crew and pilots would agree to work during this time for nothing… OK they get their salary but still it makes economic sense not to operate and prioritize the safety of the crew

  12. Worried that some travelnuts (like all of reading) will now partake, that shouldn’t. Publicizing these bargain fares makes it more tempting and not safe for the whole. #stayhome #stayheathly

  13. @Gene
    I wonder what the statistical likelihood of catching CoViD 19 would be, flying 75 segments of cross country flights in the US right now. I am going to bet very likely.

  14. Basic economic theory. In a market with no demand, prices will fall to marginal cost – casting aside all fixed costs which are sunk and unrecoverable. This is actually interesting practical proof of that theory.

  15. @Mak – but airlines who have had every incentive to understate marginal cost for frequent flyer accounting, have always concluded a saver award for a seat that would have otherwise gone empty costs them ~ $20. that’s the part that doesn’t make sense here.

  16. Spirit started $29 trans cons 2 weeks ago. The other airlines are just catching up.

    Conspiracy theory hat time:
    AA is looking to sell these tickets, will then cancel the flights, and hopes to persuade people to take the money back as a credit they will be forced to use on a $400 ticket in November or lose when they forget about it before the 6 month expiration.

  17. Lucky,

    Can you recap all the airline spend waivers and options and let me know how much it will then cost for me to get top tier status on the big 3?

    If reasonable I’d prefer to fly first class so I can maximize the multipliers and get this done fast. I have a flexible April or May, so I’d like to get this done by Summer.

    Your fan,

    Jeff

  18. These sales are looking very helpful to me right now. I am moving from the West Coast to the East Coast in July with a 2.5 year old and a 2 month old. I am having my wife fly while I drive the Uhaul so it is nice for us.

  19. We saw crazy fares from PanAm & TWA just before they went under. They both needed quick cash but ultimately still failed.

  20. If aa is still able to have the flights available and not be canceled even if they are 99% empty it they would be able to get away with just giving credits to the folks who purchased pre crisis and not have to painfully refund cash in the event of cancelled flights.

  21. As part of “bail out” from the government airlines are exempt from taxes, so the airlines gets to keep all of the 16

  22. @Rob

    Complete lie! The lower toll was based on hard social distancing. The estimates are unchanged if we continued normal activity.

    Lucky, it is heinously irresponsible to allow posts like that to publish.

  23. @Rob

    Just to clarify, the Imperial College numbers did NOT change. The original estimates were based on NO MITIGATING EFFORTS. Obviously, there are many people taking precautions so the numbers don’t apply to today.

  24. Somebody or some politician needs to call out American Airlines on Twitter and have them rescind these ultra-low, loss making fares. They are intentionally trying to create demand at these loss making fares and will further deepen the coronavirus crisis. It is pretty evident at this point that the world cannot be trusted to make informed decisions about travel and about their health and safety.

  25. @Rob – the Imperial College estimate was not walked back. The revised death estimate is consistent with the model, and is now more valid *because* the UK and US have started imposing lockdowns – as the report recommended. The previous death estimates only apply if no social distancing measures are practiced at all. The new lower estimate will only remain good IF we stay in lockdown and/or severe social distancing for many more months, allowing the virus to only spread very slowly. IN NO WAY does the revised estimate mean that the predictions were wrong, or that social distancing isn’t required anymore.

    You going out and flying around right now means you’re contributing to an uptick in social contact that would contribute, eventually to an upswing in viral spread, and potentially increased deaths.

    People don’t seem to understand: “flatten the curve” is not a cure. It’s a strategy to drag out the length of the pandemic until we find a cure / treatment / vaccine. When a curve flattens in a region or country, it doesn’t mean everything goes back to normal. It means we need to HOLD in that socially distant state, potentially for a very long time, to keep the hospitalization rates consistently low, until a vaccine is available.

    That can change of course, if there’s an effective treatment discovered that can prevent hospitalization or infection. But we don’t have that yet.

    Please don’t get your hopes up that, absent any treatment or vaccine, just a couple weeks of lockdowns will be able to end and everything can click back into place. With better testing – and antibody immunity testing – we may be able to ease some social distancing, reopen some restaurants with outdoor seating only, perhaps open schools. But large events, concerts, shows, and close-quarters travel will have to be restricted or banned probably until a vaccine is ready.

  26. Atlanta to Orlando on Delta was $22 Round Trip a week ago for travel everyday until June. That’s $11 one way!!!!!!! But after June, it too becomes a whopping $28 round trip daily 🙁

  27. Maybe that is how much it should really cost but they play with the supply and demand and charge whatever they want.

  28. I’d guess that these planes are cleaner than most grocery stores or pharmacies. I’d love some of these deals to come to Chicago – great opportunity to catch up with friends in other places. Unless someone is truly locking themselves in their homes for a month, there’s no reason why a flight is any different than a trip to Walgreens. Given the perilous state of the airline industry, I’d feel better about supporting a few jobs than continuing self righteous social distancing.

  29. All of my clients have been loving these deals as we have been actively promoting them with our email blasts. We had also gotten some bulk discounts with our firm, so these can actually be had for cheaper than 16.

  30. @Jamie,

    NO MATTER what AA does, you can always spin it as bad ethics and bad behavior.
    Raise prices they are bad, Lower them they are bad. Give free bags (or just fly an aircraft) and they are adding to Global Warming. Charge more for a POS and they are racist. We want more room. Wait, more room also adds to Global Warming.

    Since when did we redefine American Freedom as mine and not ours?

  31. Anyone basing travel decisions on studies from Oxford, Stanford – please don’t.
    I am a Stanford alum of the MS program in Computer Science -emphasis on Numerical Analysis (1985).
    The effects of a virus can be studied only after time has lapsed, a substantial amount of humans are extensively tested and a large enough data set is available to make any forecasts that have any semblance of being remotely accurate.
    In these times with the data gathering still in its early stages it is prudent for health preservation to err on the side being overly cautious rather than the opposite.
    Stay safe everyone!

  32. Hey, these fares are good through the end of April! That’s after Easter, when Trump will have vanquished the virus and we will all be free to go about our business as usual.

    I’m buying 10 tickets!

    /sarcasm off

  33. I dunno – i could be tempted to book something for memorial day weekend. If things are still awful, i’m out < $100. If things have started to normalize then i'm going to have a much needed getaway.

  34. Some medical people still need to travel for needed services in other areas of the country. There are also family members that need to assist with other family members in other areas of the country. Sometimes there are families in a city that have children without family nearby. If they get sick they do need another family member to fly in or if there is an unexpected death.
    I think that is the only travel going on now.

  35. The lack of airline revenue management and pricing knowledge of some of the previous posters is truly sad. AA did not create new buckets for these low fares. Since when are “B” and “O” booking classes new discounted buckets for AA?!?!?! AA’s analysts certainly did not make new buckets for these low fares, i.e., B is the standard Basic Economy booking class while O is a standard Economy discounted bucket.

    Ben, unfortunately this is another case of AA’s analysts being clueless. Check out 4/6, the 3-class (4-class really but on domestic sectors AA doesn’t sell Premium Economy except to Hawaii) B777-300 is operating AA 1228 with the following fares: $16 Basic (B), $48 Standard Economy (O), $638 Business (J), and $2335 First (A) all on a one-way basis. Prime example of incompetence left and right… Business Class is booked to less than 15% and First Class has zero seats booked being priced at $2335 because AA’s analysts think that the elasticity of demand indeed varies between $16 and $2335 or higher with very few days left to sell the premium cabins. This may be an excellent time for AA to terminate an army of untalented analysts. Mind you, these are the same analysts that not that long ago before the outbreak, they priced Business Class 10 times more expensive than First on the same flight even though Business has 52 seats and First only has 8; seems like these analysts failed Macroeconomics 101. Overall, AA must really think that just because they put Flagship on something, consumers are irrational people willing to pay thousands of dollars for a terrible product that now won’t even get real inflight service.

  36. @Jr
    What was the meal like? Transcon flights are supposed to get a reduced one-tray meal service. Did AA load the nicer bedding and amenity kits on your flights?

  37. “People shouldn’t be encouraged or tempted to fly right now, for everyone’s sake.”

    Lucky, you’re so much better when you just stick to your trip reports. We can get our scientifically based advice from better sources.

  38. $16 per seat isn’t rational. No matter what the price you will not generate demand. AA knows this, and a rational company (which AA is by the way) would just cancel the route. Even if you still paid all the labor, the fuel savings alone would be worth canceling the fight for the revenue it would generate.

    AA is choosing to still fly this route and my guess is that this route is now primarily for Cargo. AA figures if they can pick up a few extra bucks in passengers and even poke their competitors in the eye in the process.

  39. AA has a debt to asset ratio of 4.x

    This company is in big trouble, not sure it will survive.

    As much as it looks tempting, not flying at this time.

    Our internal flights should be on lock down, this is negligent to move people around.

  40. I guess American Airlines is on the side of it is better to make some money than none at all. Very difficult and unfortunate times. Hopefully, things will get better as soon as safely possible in the world.

  41. The only passengers that are traveling at this time are for family emergency needs and medical professionals that are being relocated. It is all about families and Covid-19 and where help is needed. There is not any leisure or business travel going on right now.

  42. James N – Well if you’re clearly not welcome, why not go on bother other people with your moronic theories instead?

  43. Could it be that the airline is required to maintain the route in order to keep their contract to either the airport for a berth/gate or the FAA for a route? If yes, then the sunk cost is already burned and every variable net profit they receive is a benefit.

    Maybe they also hope to do some marketing and branding by putting people in their flag and metal. Unbelievable prices though.

  44. Also a possibility that they already know the terms of the CARES Act and are abiding by it from day one. Maybe AA is following guidelines such as keeping planes in the air and staff employed even if it meant a loss. This certainly would be a smart strategy if the airlines knew that Congress is already financially backing such a move.

  45. Just to be clear from the cancel culture crowd: If I decide to fly right now but wear a respirator the entire time, am I still a POS?*

    *I’m not actually considering doing this, but I’m genuinely curious what the social media lynch mob thinks.

  46. For $20 each we flew of Frontier LAX to ATL with masks, lots of hand sanitizer and a “don’t touch anything anywhere” game for our three kids last Sunday. Did have to also pay for a couple of bags, but still it was an awesome deal. We have quarantined since.

  47. @Reed I hope that they find a vaccine and/or cure soon. But what would happen if this was a virus where a vaccine could not work and no cure could be found (not a happy possibility, but it is a possibility)? Would you suggest that society continue to live in quarantine forever? Is there a limit for the amount of time before giving up on this and actually living regular life, especially with all of the unemployed and economic consequences?

    Why are experts not being more clear with your explanation that the lockdown will continue indefinitely until something is discovered, even if that takes years? I keep reading people who post things such as the more that people go out, the longer the lockdown will last. But based upon what you said, this is not the case at all and these people are completely wrong, correct?

  48. @Marco Well he’s just echoing what doctors and scientists are also saying. And if you prefer to get your info from Trump, last time I checked the US is still within Trump’s 14-day social distancing advice. And if you’re not American, much of the rest of the world (especially Europa) is also severely limiting movement.

    But ok sure, Ben should stick to trip reports…

  49. Shame on AA for enticing people to get on an airplane with these fares… and even more shame to those idiots that purchase these fares and risk their health.

  50. Richard – Yes, that is what the Imperial College study guy said, but his data does not suggest that. The main reason for the reduction was the increase in R0 with more assymptomatic cases. His original model needed us to bend the curve for 12-18 months. The new one was just a few weeks. You can run a basic expotential table in excel yourself. 3-4 weeks bending the R0 from 3.0 to 1.5 and then opening back up, you end up in the same place just a month later, so that can’t be it, especially since about 80-90% of those that end up a vent die regardless.

    Regardless, the Oxford Study and Stanford studies, which ironically came out just a couple days before the Imperial College revised their estimates down by at least 96%, started at the significantly lower estimate, and Amherst college did a study of 13 experts 2 weeks ago and most expected about a quarter million deaths in the US +-150k. In short, the US media has run with the bad estimates from this thing non-stop and isn’t discussing the estimates that show this will likely be the equiv of a very bad flu in terms of deaths but not catastrophic.

    Lastly, without doing anti-body studies, they really don’t know as they have to make unknown assumptions about those with mild cases or assymptomatic all together that are not counted in the denominator. As someone that has worked with #s for a living for more than 10 years now, graduating summa cum laude with a BS in Economics and received a MBA from a T10 program, I can tell you its easy to make a model spit out whatever you want it to, especially with several unknown variables.

  51. Potreroflyr & others

    If that is true, why did the Imperial College original model predict peak cases 12 to 18 months from now WITH bending the curve and now saying mid April? Put simply, several large cases came out and suggested much lower # of deaths AND countries are starting to ramp up to test for antibodies. With anti-body tests, we will know exactly which wave we are on (~10 on his original model, vs 18-21 for the Stanford, Oxford, his revised study). Stanford and Oxford both asked Governments to begin antibody studies ASAP to prove where we are once and for all and how many have immunity already.

    Lastly, why are none of these bend the curve studies actually putting a value on each piece of bending the curve? Some of the bend the curve part has NO economic costs (washing hands, surfaces, white collar working from home, social distancing, etc) while others literally will cost the world $20+ trillion in economic output (shutting everything down). How much do they estimate R0 is reduced by each of these?

  52. @Mark Anley. That’s for Air Canada’s new “Cockpit Class” they’ve introduced. You’ll be in seat A0, the Co-pilot’s position.

  53. B6 is doing something similar (and DL isn’t far behind). WN is at least keeping a floor under fares.

    My best guess would have been that the computers are possessed and the human fare-setters are overloaded…but there is no way in H-E-Double-Hockey-Sticks that these fares were filed as of two months ago.

    As to folks “risking life and limb if AA were still distance-based”, I feel compelled to point out that a LOT of program cross-credits are still distance-based. If you’ve got a few flights on BA (for example), racking and stacking flights at those prices might actually make sense as a status run.

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