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Tom Bacon wonders if the race to the bottom in airfares will be a bumpy ride for customers of scheduled carriers like American Airlines and United

In January, American Airlines announced that it too would be launching new Basic Economy fares. In other words, lower fares with fewer amenities that allow them to better match ‘ultra low cost carrier’ fares like Spirit and Frontier. United Airlines had made a similar announcement late last year. Delta, on the other hand, has been offering a version of Basic Economy for a few years. 

Interestingly, however, United and American’s proposal differs in some key ways from what Delta is already offering: now the question is which formula will best meet the objective of these new fares. There are two differences here worth highlighting. Let’s take a look at these.

1.  No carry-on bags

Unlike Delta’s established Basic Economy fares, both American and United have announced that passengers who purchase their low fares will not be allowed a carry-on suitcase. This feature is intended to match Spirit and Frontier, both of which assess carry-on bag fees – but this restriction is new for a large, global carrier. This feature in particular has created a controversy, not unexpected given the public’s general distaste for airlines’ deteriorating service and increased fees. The bag restriction provoked a response from a prominent New York politician, Senator Chuck Schumer, denouncing the new fare and proclaiming free checked bags a ‘right’ of passengers. Many analysts and customer groups agree with Schumer. 

Just for the record, I don’t but note that the proposed no carry-on rule entails a potentially worse customer experience than what is offered on the ULCCs. It’s totally okay to limit carry-on baggage: Spirit/Frontier’s carry-on policy has helped make them among the most profitable airlines in the US. The ULCCs, however, have implemented these fees in a way that is not anti-customer.

As a recent ULCC passenger with complete understanding of the bag rules and other unique ULCC restrictions, there were no surprises. Even thought I knew the rules, I decided to push them a bit. ULCCs do permit small personal items, such as purses or briefcases, to be carried on for free. However, I carried on a small backpack with my clothes for a three-day trip, a somewhat large ‘personal item’. As it turned out, everyone in my row had the same idea and the same happy result. We each boarded with a backpack – one pack seemed to carry a full week’s worth of clothing -- and we all avoided any bag fee. None of us were questioned; none of backpacks were measured. Enforcement of ‘too-large’ carry-ons seemed lax.

Also, the overhead bins were not full – there was plenty of room for my ‘personal’ item (remember, the ULCC policy is to charge more for carry-ons than for checked bags so their bins tend to have plenty of space). 

I compared the fare I paid with my fellow passengers – the woman next to me boasted of her sub-$50 fare while I was quite happy with my $80 fare. We were all satisfied customers despite, or potentially even because of, the carry-on bag policy.

But let’s be clear: the proposed United/American Basic Economy experience will not be this positive for the following reasons.

  • No overhead space

Both American and United say the passengers paying the new fares will board last; they are likely to be faced with full bins (other United fares include free carry-ons). Sure, the carry-on is supposed to fit under the seat – but on my ULCC trip I could easily place both my overcoat and my carry-on in the bin. Passengers paying the new fares will likely not have that option.

  • Strict Enforcement

With the new fares, the airlines will apply new bag measurements for passengers carrying on ‘personal items’ to ensure they truly can fit under the seats. Their agents are accustomed to clear guidelines and, typically, are obliged to rigidly enforce them. American and United have both announced a new fee for Basic Economy passengers checking a bag at the gate.

  • Boarding Challenges

The combination of less desirable seating (that is, middle seats near the back) and boarding last will further disrupt the boarding process for all passengers (most airlines board the back rows earlier in the boarding process).

  • Difficulties in communication

These airlines will likely have more difficulty communicating to customers the baggage restrictions associated with the fare. Remember, I was not surprised by the ULCC policy, which applies to all ULCC flights. 

This brings us to the second difference between what American and United are proposing and what Delta already has.

2.  System-wide offering

United and American have both announced their intention to ultimately offer these fares on all flights. Delta, the only existing airline with Basic Economy, similarly has stated its intent to offer the fares everywhere – but even today availability is quite limited. Delta’s website displays these fares only where they need them. Close-in flights, flights at peak times, and flights where ULCCs are not a factor do not have the low fares. I expect United and American will both similarly limit availability.

So where is it all headed? I’m sure American and United have thought it all through but the question is this: do they indeed have a better formula for Basic Economy than Delta? With both airlines in the process of rolling out the new fares, albeit in a phased approach, we’ll see soon enough how customers respond to the new no carry-on policy. It will take longer to see how these airlines ultimately limit availability. Stay tuned.

Tom Bacon has been in the business for 25 years as an airline veteran and now industry consultant in revenue optimisation. He leads audit teams for airline commercial activities including revenue management, scheduling and fleet planning. He is also a regular contributor to EyeforTravel.com.

Questions?  Email Tom or visit his website

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