Basic economy class is a travel class offered by a number of airlines. The class has superseded economy class as the cheapest airfare option for passengers and generally comes with more restrictions when compared to standard economy fares. Restrictions vary between different airlines, but they generally include not allowing passengers to change or cancel tickets or select seats for free. They are seen as a strategy for market segmentation.
In the United States, Delta Air Lines was the first airline to introduce basic economy fares in 2012. Following Delta's launch of such fares, United Airlines, American Airlines, Alaska Airlines, JetBlue, and Hawaiian Airlines have all introduced some version of basic economy, though the restrictions of each airline vary. Outside the United States, several airlines have introduced fares with similar restrictions under different names, such as hand baggage only or hand luggage only fares.
The introduction of basic economy airfares has been generally negatively received. Although many airlines initially claimed that these fares were introduced as a way for them to compete more effectively with low-cost carriers (LCCs), basic economy fares were gradually expanded to routes without LCC competition. Many publications instead saw them as a market segmentation strategy to encourage passengers to pay extra for standard economy to avoid the restrictions associated with basic economy, thus providing airlines extra revenue.
Purpose
Basic economy class fares have been widely described as a market segmentation strategy for airlines to upsell customers to more expensive fares, instead of a product that airlines want customers to purchase. Former British Airways pricing executive Jeremy Quek described basic economy as "just another product that airlines are using to further segment the marketplace". Writing for Bloomberg News, Justin Bachman argued that basic economy fares cause passengers to pay more to fly, and that airlines increase revenue by increasing standard economy fares while introducing basic economy, causing customers to trade up to standard economy. Bachman described this phenomenon as "sleight-of-hand marketing".
In Runway Girl Network, aviation writer Seth Miller argued that basic economy is not about helping airlines compete with LCCs, but instead is a way for airlines to increase incremental revenue. As evidence of the trend, Miller pointed out that while basic economy fares were initially confined to markets where full-service carriers compete with LCCs, they were subsequently expanded to domestic flights without LCC competition. He noted that basic economy works well at pressuring passengers to spend more money for the same product.
By market
United States
In September 2018, the CAPA Centre for Aviation described basic economy fares as a "permanent fixture" in the United States market. The publication pointed out that segmented fares have been effective at increasing revenue for Delta Air Lines, American Airlines and United Airlines—three of the largest international airlines in the United States. CAPA further noted that the resulting larger pool of lower fares has placed pressure on the revenue growth of Spirit Airlines and Frontier Airlines, two ultra-low-cost carriers.
Delta Air Lines
In 2012, Delta Air Lines became the first U.S. airline to introduce basic economy. Delta initially limited the availability of these fares to routes where it competed against LCC Spirit Airlines, calling basic economy its "Spirit-match fare" in its 2015 earnings call. The fares were available in 75 markets in early 2015 and 500 in early 2016. Delta subsequently expanded the fares to all 20,000 domestic markets, including routes where it faces no competition from LCCs. Delta president Glen Hauenstein noted that Delta received $20 million in extra revenue from basic economy fares from January to March 2016. Hauenstein also said that more than 50% of passengers bought up from basic economy to more expensive fares when they were presented with warnings about restrictions associated with basic economy during the sales process.
In October 2017, Delta executives said that they did not want customers to purchase basic economy fares, seeing the fares both as a defensive measure against low-cost airlines offering low fares, and as a way to lure prospective customers into buying more expensive options. In April 2018, Delta introduced basic economy on transatlantic flights. , basic economy passengers on Delta receive a free carry-on allowance, but are not allowed to select seats or change, cancel, or upgrade their ticket after purchase, regardless of elite status. Seats are assigned at check-in.