American Mimics United With Fare Barring Use of Overhead Bin
American Mimics United With Low Fare Barring Overhead-Bin Access
(Bloomberg) -- American Airlines Group Inc. followed United Continental Holdings Inc. in announcing no-frills tickets that limit carry-on bags to those that fit under a seat, bolstering efforts to compete with fast-growing fare discounters.
The new basic-economy tickets will go on sale Feb. 10 in select domestic markets, and the first flights will begin soon after, the Fort Worth, Texas-based airline said in a statement Wednesday. American didn’t identify the initial 10 markets or provide specifics of the discount compared with other coach cabin fares.
American, United and Delta Air Lines Inc. are rolling out lower fares with few amenities to compete with low-cost carriers such as Spirit Airlines Inc., which appeal to customers who select flights based primarily on ticket prices. With basic economy, American can appeal to budget travelers without more broadly discounting seats, said Jack Atkins, an analyst at Stephens Inc.
“It’s a positive for the earnings, for the stock, and its important to do in order to prevent dilution of the cabin, given the growth” of deep discounters, he said. “They are going to use this more as a defensive tool than an offensive tool.”
American rose 1.6 percent to $47.50 at 11:58 a.m. in New York. The shares rose 21 percent in the 12 months through Tuesday.
American’s revenue for each seat flown a mile, an industry benchmark, declined in 2015 as it slashed fares to keep from losing customers to Spirit and Southwest Airlines Co. in Dallas and several other major cities.
“Ultra low-cost carriers are growing rapidly -- right in our hubs,” American President Robert Isom told employees in a message Wednesday. “Competing aggressively against these airlines is not optional.”
United said it will debut its basic-economy service in Minneapolis later this quarter. The airline said it will add the fare option on service to nearby foreign markets such as the Caribbean. It is still deciding whether to add it to longer international flights. Delta already sells similar offerings, although it allows purchasers to use the overhead bins.
Fliers opting for American’s basic economy fare can carry on only one bag that must fit under the seat in front of them. Passengers whose luggage doesn’t fit must pay a $25 checked-bag fee at the gate, plus an extra $25 gate-service charge. Seat assignments will be made automatically when customers check in, although paid seat selections can be made 48 hours before the flight. Tickets are non-changeable.
American’s basic-economy customers won’t be eligible for upgrades and can’t fly stand-by or make changes the day of flight. They can earn miles in American’s loyalty program and still receive free snacks, soft drinks and in-flight entertainment. While American plans to expand the offering based on customer interest, it won’t be available on every flight.
The elements of a basic-economy ticket will be included in “multiple disclosures” at the time of purchase. Travelers also will receive reminders as the day of the flight nears, including at airport check-in kiosks.
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