American Airlines expects to complete the roll-out of basic economy fares to its entire domestic network by end-September, as it continues to aggressively price-match its rivals.
The Oneworld carrier, which began selling the no-frills fares in March on some routes, now offers it in 78 markets.
About half of all customers offered a basic economy fare opted for a more expensive economy fare, in line with earlier expectations, said executives earlier today on an earnings call.
American is seeing an average upsell of $23 per passenger, going up to $40 for close-in bookings, says senior vice-president of revenue management Don Casey.
The airline is the last among US mainline carriers to complete the implementation of basic economy fares on domestic markets. Delta Air Lines, the first to offer them, launched it in 2015 while United Airlines completed its roll-out earlier this year.
Among the three airlines, United is the only carrier to offer basic economy fares down to the very last seat in the cabin. In comparison, basic economy fares on Delta and American can sell out.
However, Casey hints that American might have some changes up its sleeve. Asked by an analyst why the airline is not offering basic economy fares all the way, he says: "When we roll out the entire product, you will see… It's a bit too soon to judge what our plan is."
American's basic economy fare implementation comes as the airline reiterates its strategy to price-match rivals that fly into its hubs.
"For anyone flying into our hubs, we've been matching their fares since mid-2015," says Casey. "Nothing has changed for us… basic economy allows us to continue matching the fares."
The continued roll-out of basic economy across American's network will likely deal a further blow to ultra low-cost carrier Spirit Airlines, which reported yesterday a challenging pricing environment that deteriorated from late June.
While Spirit would not attribute its challenges to mainline carriers' basic economy fares, it is reporting difficulties just after United completed the roll-out of the product.
Spirit chief executive Bob Fornaro pointed out on a 27 July earnings call that his airline's network overlap with American is greater than that with United. He cited pricing weakness in Chicago O'Hare, Houston Intercontinental, Newark and Denver. All four airports are United hubs, while Chicago O'Hare is also a hub for American.
Before Fornaro's appointment to the top job at Spirit, the discounter was already facing fare-matching wars at Dallas/Fort Worth, American's main hub.
Casey's comments indicate that American only plans to increase its efforts as basic economy advances across the rest of its domestic network.
"We respond to price actions at every [sales] channel," he says. "We will match any fare in the marketplace at our hubs."
Source: Cirium Dashboard
