Basic Economy Class: Buyers Beware

by Shawn L Fitzpatrick

It is now buyers beware as big airlines fully embrace ‘Basic Economy’ fares. As more airlines embrace Basic Economy fares, consumer advocates and some members of Congress argue this new class of fares is simply an attempt to squeeze more money out of travelers at a time when airlines are making already astronomically healthy billion dollar profits.

When Michael Zwirn recently booked tickets for his family of three to travel from Washington, D.C. to Chicago to Boston, he snagged what he thought was a great deal – until he read the fine print. It turned out he’d inadvertently purchased “Basic Economy” tickets on United Airlines, which meant that he got a:   1) Non-refundable ticket with no itinerary changes allowed to his trip 2) Low to no frequent flier miles credit 3) No access to the overhead luggage bins (meaning only bags big enough to fit under your seat) 4) No pre-assigned seats (meaning you can only check in at the airport and only then be assigned your seat) 5) No guarantee a group will be seated together (yes that means even when travelling with your twelve year old) and 6) You will be the last group to board the plane.

Those up until now standard “perks” are now apparently only available from here on out with higher-priced tickets.

For Zwirn, a think-tank program director who travels frequently for work and prides himself on keeping up with the latest in transportation trends, it was an important lesson. “If your first cut is on the basis of price, you have to read very, and I mean Very, carefully,” he said.

Call it the age of “a la carte” flying. What was once exclusively the domain of ultra-low-cost carriers such as Spirit Airlines and Allegiant Air is now being embraced by the nation’s biggest carriers. Delta Airlines was the first to experiment with no-frills fares on select flights in 2014. Last year, United and American also followed and adopted the “Basic Economy” model. Now all three big carriers have further expanded thier offerings. Recently United, American Airlines, British Airways, Iberia Air, Finnair and Virgin Atlantic Airways have also started offering Basic Economy Fares on select international flights with no checkin bags allowed. Expect other carriers to follow soon.

Airlines have long worked to differentiate themselves, encouraging loyalty by offering generous perks for frequent fliers and those who can afford to fly first class. But the reality is the vast majority of the nation’s travelers fly infrequently, and for them, price is paramount.

That is part of what has driven the success of bare-bones carriers such as Spirit Airlines and Allegiant Air. The airlines say Basic Economy fares are about offering personalized choice. Travelers can pick and choose the options that appeal to them instead of having to pay for things they don’t want or know that they will not use. “Carriers are responding to the increased competition by offering customers a variety of additional amenities, price combinations and service offerings to choose from that meet individual needs, and Basic Economy is an example of that,” said Alison McAfee, spokeswoman for Airlines for America, or A4A, a trade group that represents several of the nation’s largest carriers.

United Airline spokesman Jonathan Guerin said, “It is a competitive product designed to compete with other carriers who offer unbundled product, another opportunity to offer our customers a choice in how they are traveling.” What you get for the price of a Basic Economy ticket varies by airline and in some cases is still evolving. Generally, though, Basic Economy gets you a seat plus space for a tote or bag that could fit under your seat – but not much else. No changes are allowed, and if you don’t fly and use the ticket on your set dates and times, then you lose the money that you paid.

Consumer advocates and some members of Congress argue this new class of fares is simply an attempt to squeeze more money out of travelers at a time when airlines are already making more than healthy profits. “While these Basic Economy fares may seem to the average traveler to be a good deal, in reality they may end up costing you more,” said Florida Democrat Sen. Bill Nelson. Senator Nelson, the ranking Democrat on the Senate Committee on Commerce, Science and Transportation, recently released a report that examined all such Basic Economy fares.

In a 2015 earnings call, Glen Hauenstein, now Delta’s president, emphasized that basic economy is not necessarily a lower fare but the lowest fare the airline has available. “We want people to buy the products and services they want, and this is really not about lowering fares but allowing people to select what features that Delta offers they want,” Hauenstein told investors.

Said Sylvester Wellington, of travel agency LastMinuteFlight.com: “I absolutely think this is the new normal. It is kind of sad – things now considered perks used to be given for free and part of the flying experience. Of course the airlines’ taking away of standard perks is now repackaged in a nice way – PR spinning it nicely by calling it “more choice” and “more flexibility” of travel.” But overall, Wellington said, the trend could be a somewhat positive one, possibly opening the door for more people to go out and travel.

Others disagree. “I don’t see an upside, to be honest,” said Zach Honig, editor at large for The Points Guy, a travel advice website. “It’s great for airlines and their shareholders, either from people buying up or paying [extra fees] later, but it is definitely a no-win for customers. The airlines will suggest they have lowered fares, but they have not. They basically are offering the same priced ticket fare as before but with less perks and called it “Basic Economy”. And then renamed the Economy Class ticket fare with perks that they offered before – calling it now Standard Economy but with a higher price.” Presently there are now three distinct classes offered in Economy Coach Class – Basic Economy, Standard Main Cabin Economy and Premium Economy.

It is hard to know how much airlines make, since they are required to report revenue only from ancillary charges such as baggage, cancellation, seat assignment and date change fees. In 2017, U.S. carriers made $2.2 billion on those fees alone.

But there is no denying that “a la carte” flying has proved profitable. According to the report released by Senator Nelson, basic economy fares contributed roughly $20 million in incremental revenue for Delta during the first quarter of 2016 alone. United said it expected adding a no-frills fare option would lead to at least a $200 million in incremental revenue in 2018.

For the larger legacy carriers, the shift to charging for options that were once included in the price of a ticket began nearly a decade ago in 2008, when a spike in fuel prices prompted American Airlines to begin charging baggage fees. Other airlines followed. Airlines soon discovered they could charge for other services – early boarding, meals, pre-assigned seats, extra legroom, premium bulkhead or exit row seats.

Public sentiment has been mixed. “Providing you the option to customize your trip is a good thing, but I also worry that airlines use this as an excuse to give you fewer things for the same price,” said District resident Maggie Brown, 33, who works for a trade association and flies traditional and discount carriers.

R Edward Webber, a 42-year-old realtor from Los Angeles, said that “if it’s cheap enough, it might be worth it.” The shift has made it even more important for travelers to pay attention when booking flights, Webber said. “It does make the process of buying a ticket much more difficult,” he said. “It’s very hard to make sure you’re comparing apples to apples.”

Do note that some third party websites does its best to differentiate between standard economy fares and basic fares, listing for example whether there are extra charges for carry-on bags, advance seating assignments, priority boarding or ticket changes.

A recent search for a round-trip ticket between Baltimore-Washington International Marshall Airport and Los Angeles International via United yielded three options: a basic economy seat priced at $307, economy at $334 and economy flex (a refundable option) at $457. But the basic economy price did not include the cost for seats with more legroom ($99 to $119 on the outbound flight plus additional $34 to $95 for the return flight), priority boarding and check-in options ($88) or baggage charges ($25 for the first bag, $35 for the second). A passenger flying basic economy on United who brings a large carry-on, in addition to a small personal item like a backpack, will be charged an extra $50 – the standard check-in luggage fee of $25 plus an additional service fee of $25 for checking it at the gate.

A few months ago, Mr. Webber, the realtor from Los Angeles, was headed to D.C. to meet friends. He used Orbitz to check airfares and spotted a cheap ticket on Delta and clicked “purchase.” “I just thought it was a really good deal,” he said. After paying and receiving confirmation of purchase – it was only when he tried to pick his seat that he realized it was a Basic Economy fare. However it wasn’t so bad. On the way to D.C. via Salt Lake, he ended up in a “premium economy” seat toward the front of the plane. But on the trip home he was assigned a middle seat toward the back of the plane. There was less legroom and the seat had less cushion than those closer to the front, he said.

Given his recent experience, however, Mr. Webber said he’d book basic economy again – but only for short trips on short haul domestic flights and if travelling alone. “Fortunately, it worked out great for me,” Webber said, “but I know there are stories where people think they’re getting a great deal and then once they add all the other extra fees, it’s not that great.”

As for Zwirn and his family trip – he ended up rebooking the tickets so he could guarantee his family would be seated all together. The cost was nominal – only about $60 more – so it was worth it for him.

And that is exactly what the airlines are counting on – that given the option, travelers will opt to pay more. The $60 here for four seats together one way and $25 there for one checked in luggage on only one flight – all add up to the airline’s now increasingly hefty bottom line.

“Do not go where the path leads, travel instead where there is no path and leave a trail.”  @wbbrjp

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