AA to expand Basic Economy to entire domestic system

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American Airlines jet
Photo Credit: Shutterstock
American Airlines will be selling Basic Economy seats on its entire domestic network by the end of September, company president Robert Isom said during the carrier's earnings call Friday.


American also will greatly expand the availability of its international Premium Economy cabin by the end of the year.

Since launching Basic Economy sales in February, American has begun offering the fare class on 78 domestic and Canadian routes. Basic Economy ticket holders trade a discount of approximately $20 each way for late boarding, seats in the back of the plane, tickets that cannot be changed or refunded and a prohibition on carry-on bags that can't fit under a seat.

A key goal of the product offering is to make American show-up more prominently on ticket searches in which the flyer is looking for the lowest fare. But once a potential buyer is captured, American attempts to upsell the buyer to standard economy through a screen interface that denotes the relatively small additional cost as well as the disadvantages of Basic Economy. Approximately half of all customers who initially select a Basic Economy fare decide to buy-up to standard economy during the buying process, with the average upsell being $23, senior vice president of revenue management Don Casey said.

With American's expansion of Basic Economy to its entire domestic system, the carrier will join fellow legacy airlines Delta and United, which already have domestic systemwide basic economy fares as they seek to compete with low-cost competition.

Meanwhile, American is the U.S. airline trailblazer when it comes to having an international premium economy cabin. American currently offers its Premium Economy on 10 aircraft, Isom said. But that number will increase to more than 60 by the end of the year as the carrier retrofits its Boeing 777-200 fleet. The company also expects to retrofit most of its widebody aircraft by the end of 2018.

Premium Economy ticket holders sit in plusher seats than those in the economy cabin, have significantly more legroom and get enhanced cabin service and food.

American gave its updates on the Basic Economy and Premium Economy rollout as it reported net income of $803 million for the second quarter, down 15.5% year-over-year.

The carrier reported operating revenue of $11.1 billion, up 7.2% from last year and $30 million better than analyst expectations, according to Seeking Alpha. Expenses were up 11.1%, fueled most notably by wage and salary increases.

American reported earnings per share of $1.92, beating expectations by $.05. Its stock was trading at $49.30 Friday morning, down .69%.

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