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As Basic Economy Falters, United Retreats

By Matt Villano

Sep 19, 2017

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Courtesy of United AIrlines

The airline’s decision to pare back its low-end offering highlights the challenges of flying on the cheap.

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United Airlines is going back to basics, announcing plans to scale back its no-frills—but highly restricted—Basic Economy fares.

According to a statement by United chief financial officer Andrew Levy, the move was due to “competitive challenges,” suggesting the fares, which debuted earlier this year in some 100 U.S. markets, weren’t performing as well as the airline had hoped. An article in the Chicago Business Journal indicated United still will offer Basic Economy fares, just fewer of them, on fewer flights.

The backpedaling comes at a time when prime rivals American and Delta are bolstering their commitments to similar products. Just last week, for instance, American announced it would expand the number of routes on which it offers Basic Economy fares, pushing availability from just 10 markets to 87.

United's Basic Economy fares, promoted as a way to serve the airline’s “most price-sensitive customers,” come with a litany of restrictions, including no option to preselect seats, no carry-on bags larger than a personal item, and no changes or refunds without penalties. While budget airlines such as Spirit and Frontier allow passengers to purchase upgrades to similar fares, the bigger carriers do not.

What’s more, although the fares are among the lowest available prices at any given time, they often only are few dollars cheaper than standard economy tickets with fewer restrictions—tickets that allow for carry-ons, refunds, and even changes.

Henry Harteveldt, a travel industry expert and cofounder of the Atmosphere Research Group, explains this phenomenon is by design.

“The reality is that airlines don’t actually want passengers to buy these fares—they’re just using them as ways to publish an attractive price, bring customers to their sites, and then try to up-sell them,” he says, adding that a recent article on Bloomberg echoes this explanation. “There’s nothing wrong with up-selling a product: Supermarkets, hotels, and other retailers do it every day. The difference with these other businesses is that they’re happy with any sale, whereas airlines would rather you spend more.”

Harteveldt goes on to note that airlines claim these such low-end tickets are “additive” products, allowing them to capture revenue they may not otherwise nab. In the case of United, he says, the initial launch and expansion of Basic Economy appears to have been a little “overzealous.”

What does it all mean for passengers? Immediately, not much. On some routes, simple searches for flights on United may net fewer pricing options—options that may seem slightly more expensive than they had seemed for a while. At the same time, searches for flights on American may net more options, including those that seem slightly less expensive.

Bottom line: Now more than ever, it pays to shop around.

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