American Airlines' new basic economy fare class is achieving sought after increases to economy fares, an early analysis by Wolfe Research finds.
Over the five weeks since the no-frills fares were rolled out on 21 February, economy fares increased 117% and basic economy fares just 16% in the 10 markets where the Fort Worth-based carrier is offering basic economy, wrote Wolfe Research analyst Hunter Keay on 31 March.
Ultra low-cost carriers, which American claims the basic economy fares are a response too, matched the mainline carrier's economy fares in all the markets once the no-frills inventory was sold out, he writes.
"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 Keay. "It also makes some of this new capacity growth even more tolerable."
However, he notes that it is too early to draw long-term conclusions but that the results are "encouraging".
American is selling basic economy on 10 routes from its Charlotte, Dallas/Fort Worth, Miami and Philadelphia hubs, ahead of a broader domestic roll out later in 2017.
The carrier aims to generate $1 billion in additional revenue from basic economy and other cabin segmentation initiatives, including its new premium economy cabin on widebody aircraft, by 2020.
United Airlines debuted its own no-frills basic economy fare class on its flights from Minneapolis/St Paul on 21 February. Keay says Wolfe Research is analysing the impact of the Chicago-based carrier's fares as well.
Delta Air Lines introduced the concept of a no-frills fare class at the mainline carriers in 2015, and now offers it across its domestic network.
American declines to comment on the initial performance of basic economy.
Source: Cirium Dashboard
