The Evolution of Basic Economy – an Update

A Window into the Competitive Playbooks of the Airlines

Low Cost Carriers were a thorn in the side of the legacy carriers long before the industry felt the need to add the term “Ultra”. With networks built on maximizing revenue through connectivity, the legacy carriers became prime targets of low cost airlines who could fly point-to-point for low fares with their low cost structure. Starting with the original PSA and Southwest, low cost carriers required response from the legacy carriers. It is from these early responses that we first saw restrictions such as the Saturday night stay, and 14-day advanced purchase. As the first generations of LCCs age, the latest iterations required a designator to differentiate. The new LCCs that grew to presence in the 2010’s includes airlines such as Allegiant, Frontier, and Spirit, all with costs even lower than the traditional LCCs, and thereby earning the title Ultra Low Cost Carriers. The greatest impact has been felt by […]

Trend Suggests Domestic Fares Set to Rise into 2020

Domestic Fares vs Fuel

I have long disagreed with the notion that fares follow fuel price, at least directly. Fares (price) are a function of supply (seats) and demand. As such, too much capacity in a market, and fares will drop. Not enough capacity in a market, and fares will rise. Yet, as pricing moves to bring equilibrium to supply and demand, there is theoretically a floor to how low a price can go: the cost of flying that seat. Is the U.S. domestic market *gasp* rational? Since fuel is such a large piece of the cost puzzle (~20-25% of total expenses), it stands to reason that fares should, in some way, be affected by the price of fuel in a rational market. A market which collectively allowed pricing power to increase as costs increased, yet competitively drove fares down as fuel prices dropped would be a strong sign of rationality. The word “rational” […]