Stung by competition from ultra-discount carriers, American Airlines and United Continental are striking back with cheap, no-frills tickets of their own.
By year-end, the pair plans to lure budget travelers with basic-economy fares – inexpensive tickets that don’t include typical benefits like an assigned seat before you get to the airport. Taking a cue from Delta Air Lines, the carriers also hope that once the new fares draw attention, the bare-bones features will prompt some customers to “buy up” to a pricier choice, aviation consultants said.
Basic economy is one prong of a broader effort by the largest U.S. carriers to bolster revenue from each seat flown a mile, a standard industry measure that has been battered for about a year, partly because of fare wars with discounters such as Spirit Airlines and Frontier Airlines Holdings.
Passenger revenue for each seat flown a mile tumbled 8.9 percent at American in the first quarter from a year earlier, and fell 7.4 percent at United. Meanwhile, Spirit plans to boost capacity 65 percent this year in Los Angeles, an American hub, while Frontier will grow 12 percent in Denver, a core market for United, according to Credit Suisse Group.
American and United are still working out the details, but the rock-bottom fares could come with restrictions against upgrading the tickets or carry no ability to make changes or get refunds, in addition to allowing seat assignments only at the airport. American declined to comment as it continues to refine its offering. United declined to comment, referring only to previous remarks by executives.