Air travelers are already having a bad year, and most of them haven't even experienced the newest, lowest class of service yet—basic economy.
These cheaper fares, which all three major airlines—American, Delta, and United—have begun offering, carry significant restrictions compared with standard economy fares. They were created to compete with ultra-low-cost carriers such as Allegiant, Spirit, and Frontier, says George Hobica, the founder of travel site Airfarewatchdog.com.
While these low fares are currently limited to select routes and airports, they're spreading nationwide fast. American, for example, offers basic economy on 78 routes in the U.S. and Canada but says it expects to make these tickets available on all of its domestic flights by the end of September.
If you're still planning a summer vacation, or buying airline tickets to get your college kid to school or home for the holidays, these cheaper fares may be worth considering.
At first glance, these low-cost tickets may seem like a good deal. But while you might expect bare-bones service from the ultra-low-cost carriers, you might be caught off guard when these very similar tickets are offered to you by the major airlines.
Basic economy fares come with significant tradeoffs. While the rules can differ slightly among airlines, you're typically not allowed to change or cancel tickets, select seats, or use the overhead bins. Plus you may be the last to board the plane and the last to get off.
Break a rule, and you could end up saving less, or not saving at all. Say you bring a carryon-sized bag that is too large to fit under the seat in front of you. Since you can't use the overhead bin, the airlines can make you check it and may charge the applicable checked bag fee plus a $25 gate handling charge.
What's more, the savings may not amount to that much. Over the course of several days, we shopped for basic economy round-trip fares on three nonstop domestic routes on the major airlines and compared them to prices for tickets on Spirit and Frontier. The routes included Orlando-Charlotte, Atlanta-New Orleans, and Minneapolis/St. Paul-Denver, and we shopped for tickets two, four, and eight weeks in advance.
We found that buying basic economy would save between $30 and $62 compared to a standard economy ticket on the same airline. When compared to the fares on the ultra-low-cost carriers, they were anywhere from $65 to $122 higher about 75 percent of the time.
How the Airlines Benefit
While an educated consumer might be pleased to pay less for a basic economy ticket, the airlines also benefit, says Hunter Keay, a senior analyst with Wolfe Research, a financial research and analysis firm.
That's because the airlines use their basic economy fares to lure travelers to their websites. Then, once they see the restrictions, it's not that hard to get them to buy a more expensive, standard economy ticket instead, says Keay.
By offering basic economy, airlines can also boost the price of their standard economy tickets. In a recent study, Wolfe Research noted that when the low-cost tickets sell out, demand for standard economy tickets rises and the airlines respond by upping those fares.
On American flights that offer basic economy, for instance, the price of standard economy fares rose an average of 117 percent between the time they were first offered and the flight departed, compared with the industry average increase of 20 to 50 percent, the study found.
During an earnings call last month, Don Casey, American's senior vice president of revenue management, explained how basic economy helps to increase revenue. He said that basic economy gives the airline a chance to "generate more upsell to the product that we offer to customers today."
Tips for Going Basic
Despite the restrictions on basic economy fares, they still might be preferable to buying even cheaper tickets on an ultra-low-cost carrier. That's because major airlines offer a number of advantages, including more flights, newer aircraft, and better reliability.
Still, when buying a basic economy ticket, keep these tips in mind:
See if you're exempt from restrictions. If you're an American Airlines AAdvantage member, for example, you can put an item in an overhead bin and board earlier, even if you're flying basic economy. If you have a co-branded airline credit card, you may be able to check a bag for free and get priority boarding.
Be careful on third-party travel sites. While the airlines do a good job on their websites of distinguishing which tickets are basic vs. standard economy, not all third-party travel sites make it clear. Before buying a ticket on one of these sites, read the details in the ticket description so that you know whether it is a basic economy fare.
Shop around. Airfares can change at anytime. Delta's basic economy tickets were lowest eight weeks in advance of departure, while the best fares on United were offered two weeks in advance. American's fare was the same at the two-week and eight-week marks, but higher during the middle four weeks before the scheduled flight.
