American Brings Back Carry-Ons For Basic Economy Fares

American Airlines has just announced that basic economy fares will once again include the ability to take free carry-ons as of September 5, 2018. This change applies for tickets purchased or flown as of that day, so even previously booked tickets would be eligible for a free bag. Until then, the current restrictions will continue to apply.

American says that this is to make basic economy “more competitive.” Here’s what Robert Isom, American’s president, had to say about the change:

“Basic Economy is working well in the markets where we offer it, and we continue to see more than 60 percent of customers buy up to Main Cabin when offered a choice. Removing the bag restriction will make Basic Economy more competitive, allowing us to offer this low-fare product to more customers.”

I love how airline executives will claim victory no matter what, even when they’re rolling back a change because something clearly isn’t working. Isom claims that it’s working well in the markets they offer it, and that more than 60% of customers pay extra to avoid it. But now they’re going to make it “more competitive” so that presumably more customers book basic economy economy fares.

When it’s convenient Isom claims the metric of success is how many people pay extra to avoid basic economy, but now he’s saying he wants more people to buy those fares. The 60% number doesn’t account for all the customers who choose to book other airlines because of the existence of these fares, and that’s a much more valuable statistic.

This is just such exciting news. It’s not just about the removal of the restriction as such, but rather it’s so satisfying to see one of the “big three” US carriers say “oh yeah, we got a bit greedy there.”

American first introduced basic economy fares in early 2017. They started by testing them in just a few markets, and then quickly expanded to most of their domestic network. However, over time we’ve seen them roll back the prevalence of these fares, and offer them on fewer flights. Clearly they realized that they were losing business to the competition.

With carry-on bags once again being allowed on basic economy fares, the restrictions for these fares include:

  • You can only pay to assign a seat at most 48 hours in advance, and otherwise you’ll be assigned a seat at check-in
  • No changes allowed
  • No upgrades
  • Group 9 boarding (elite members and credit card holders who get priority boarding are exempt)

Bottom line

It’s oddly thrilling to see one of the “big three” US carrier roll back restrictions on basic economy fares. The US airline industry doesn’t have enough competition, yet it’s nice to see that consumers have behaved in a way that caused American to reconsider this policy.

It will be even more gratifying to see Scott Kirby at United roll back their basic economy policies, given that he bragged about how the airline would make a billion dollars on better segmenting the market (aka introducing basic economy).

Interestingly Delta has offered basic economy for many years, and since day one they’ve allowed carry-ons. Delta just consistently seems to be smarter than American and United when it comes to this stuff.

Comments

  1. I think this is big news. Was tempted to switch to all SW flights after i lost status this year on AA but SW is consistantly more expensive than regular economy on AA let alone basic. Seems like the credit card for priority boarding and a basic economy savings on AA is the way to go now that i can bring my carry-on.

  2. I think the vast majority of people who run airlines don’t really get what it is like to be a normal passenger anymore since they have been non-rev flying for so many years they don’t get what it is like to pay for a ticket and fly somewhere.

  3. I’m not sure Delta is “smarter.” The big three are constantly playing a game where they effectively collude to offer as close a product to each other as possible, competing mainly on schedule, specific hubs, etc. It’s “parallelistic” competition, meaning they’re copying each other exactly on many dimensions. American and United probably assumed that if they took away carry ons that Delta would match, and they did so to signal their willingness to remove carry ons. Delta chose not to follow, reasoning it would give them a competitive advantage for some period. So now United and American will just match Delta to take away Delta’s attempt to get a competitive advantage. If Delta ever removes free carry ons (very possible), then all three of them will just switch back.

    Essentially Delta is acting as spoiler here. But note that other airlines, including AA and UA, act as spoilers all the time when they refuse to go along with fare increases proposed by a market leader. This is just one dimension of the interplay between them.

  4. This makes a big carry-on another elite benefit that disappears though on Basic Economy fares, now everyone get’s it anyway 😉
    Only advatage is still that you don’t have to gate check it as elite.

  5. I think this was a big hassle for American employees at the counter and gate. Basic Economy passengers weren’t allowed to get their tickets from a kiosk, because American required them to show their one personal item to someone, so an employee had to print their ticket.

    When I asked about that, they said they’d had a myriad of problems with passengers trying to board with their standard two carry-ons at the gate, and getting turned aside and forced to pay to check a piece of carry-on, or upgrade. Maybe that’s why 60% of Basic Economy passengers are upgrading!

  6. I’d really like it now if United would roll back Scott Kirby along with Basic Economy. Kirby has been even worse than Smisek for United customers.

  7. Admittedly, as a long time EXP on AA, this doesn’t really impact me personally, however, I’ve moved enough of my business elsewhere this year that AA noticed & has called me about this several times in the past month. Regardless of who I am speaking with, the bottom line message has been the same-they aren’t giving me reasons TO fly AA anymore, but are giving me lots of reasons NOT to.

  8. 3rd paragraph:
    “…executives will claim victory on matter what..”
    should be:
    “…executives will claim victory no matter what…”

  9. And now it’s only United and its Superstar CEO, Oscar De Nada, with a completely uncompetitive Basic Economy offering.

  10. Am I wrong (quite possible!) in stating that now you are paying less (basic economy vs. economy) but getting a free bag? I guess you may lose seating selection.

    And to steve_c, yeah, although I don’t fly Southwest (or fly much at all) but like them, their fares always seem to be high. Partly because most things are built in (bags, cancel and get credit for flights, etc.) but even so, I have a hard time seeing them less expensive than the other airlines.

    (Most of my flying is on AA due to flying to PHX.)

  11. More likely there was poor front-line enforcement of the policy from gate-agents, so ultimately there was insufficient monetization on this front relative to other basic economy features. Might as well get the PR win from this if there is limited economic value.

    As an investor, I would like to see them at least upcharge checked bags for basic economy to offset giving free carry-ons. Easier to add a few $ onto an existing fee and not have the masses go crazy.

  12. I would think this would have been confusing for gate agents since international itineraries in basic economy including ones with domestic connections do get to take a carry on but domestic basic economy do not get to have a carry on. Very confusing to sort out. Glad it is being reversed.

  13. I hate the whole concept of basic economy, but I guess it’s not going anywhere. This is why I consistently fly Delta and avoid United: I want my carry-on, and I ain’t paying for overhead bin space. Plus with my Delta cc, I can still board early and check a free bag, so it works out.

  14. I went on a crusade when Basic Economy fares launched due to the fact that our travel policy indicated that we must take the cheapest fare and generally adding a bag onto basic economy made it not the cheapest fare and successfully got the policy changed to exclude Basic Economy. I wonder how this translate to a success for American… I guess they got to increase prices in a sneaky way.

  15. Lol even the most dreadful airline in SE Asia still include 20kg checked baggage and 7 kg cabin baggage on their lowest fare without extra charge

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