* Basic economy class is leading to increased fares for other tickets
* An “enormous synthetic fare increase” says one analyst
* 117% rise for the cheapest main cabin fares
While American Airlines’ “basic economy” fare sounded promising when it was introduced earlier this year for travelers, a new report says it might be doing more harm than good. While the lower tier offering has made flying relatively affordable for passengers purchasing “basic economy” tickets, prices for the other fares have gone up. The Street says ticket prices for American Airlines and its competitors have increased since they introduced the new, no-frills basic economy class six weeks ago.
“If network airlines can pull this off in larger scale, which we think they can, it is a potentially enormous synthetic fare increase, though it will take time,” says airline analyst Hunter Keay of Wolfe Research. “It also makes some of this new capacity growth even more tolerable.”
Keay followed American’s basic economy fares daily in the 10 markets where it is offered for five weeks. He concluded that in the one or two weeks prior to travel, the availability of basic economy tickets shrunk, leading to a 117% spike in the cost of the next cheapest main cabin fares. It also led to a spike in competitor’s fares/
“As soon as the basic economy fares went away, Spirit and Frontier raised their own fares, eventually by 62% on average, three days later,” says Keay.
On February 22, American’s basic economy fare in the Miami-New Orleans was $122, and main cabin fare was $142. At the same time, Spirit was charging $59. By March 7, Spirit was raising its prices, as American’s tickets were quickly selling out.
“The lowest ULCC (ultra low-cost carrier) fare gradually crept up to AAL’s basic economy offering about three weeks before the day of travel,” says Keay.
In other words, if you can scoop up a seat in American’s basic economy class — or shop from their competitors while basic economy seats are still available — you’re in for a good deal. But if you wait too long, prices will start to rise across the board, and even the regular economy class seat you’re sitting in, might be more expensive than you first thought.