It's buyer beware as big airlines embrace 'basic economy' fares

When Michael Zwirn recently booked tickets for his family to travel from Washington, D.C., to Chicago to Boston, he snagged what he thought was a great deal - until he read the fine print. It turned out he'd inadvertently purchased "basic economy" tickets on United, which meant no changes, no access to the overhead bins and, most critically, no guarantee the three of them would be seated together.

Those "perks" were available only with higher-priced tickets.

For Zwirn, a think tank program director who travels frequently for work and prides himself on keeping up with the latest in transportation trends, it was an important lesson.

"If your first cut is on the basis of price, you have to read very carefully," he said. Call it the age of a la carte flying.

What was once exclusively the domain of ultra-low-cost carriers such as Spirit and Allegiant is now being embraced by the nation's biggest carriers. Delta Air Lines was the first to experiment with no-frills fares on select flights in 2014. Last year, United and American adopted the model. Now all three have expanded such offerings, with American offering the fares on selected international flights.

Airlines have long worked to differentiate themselves, encouraging loyalty by offering generous perks for frequent flyers and those who can afford to fly first class. But the reality is the vast majority of the nation's travelers fly infrequently, and for them, price is paramount.

That's part of what's driven the success of bare-bones carriers such as Spirit and Allegiant. Airlines say basic economy fares are about offering choice. Travelers can pick and choose the options that appeal to them instead of having to pay for things they don't want.

"Carriers are responding to the increased competition by offering customers a variety of additional amenities, price combinations and service offerings to choose from that meet individual needs, and basic economy is an example of that," said Alison McAfee, spokeswoman for Airlines for America, or A4A, a trade group that represents several of the nation's largest carriers.

United spokesman Jonathan Guerin said, "It's a competitive product designed to compete with other carriers who offer unbundled product, another opportunity to offer our customers a choice in how they are traveling."

What you get for the price of a basic economy ticket varies by airline and in some cases is still evolving. Generally, though, basic economy gets you a seat but not much else. No changes are allowed, and if you don't use the ticket, you lose what you paid.

Consumer advocates and some members of Congress argue this new class of fares is simply an attempt to squeeze more money out of travelers at a time when airlines are already making healthy profits.

"While these basic economy fares may seem to the average traveler to be a good deal, in reality they may end up costing you more," said Sen. Bill Nelson, D-Fla. Nelson, the ranking Democrat on the Senate Committee on Commerce, Science and Transportation, recently released a report that examined basic economy fares.

In a 2015 earnings call, Glen Hauenstein, now Delta's president, emphasized that basic economy is not necessarily a lower fare but the lowest fare the airline has available.

"We want people to buy the products and services they want, and this is really not about lowering fares but allowing people to select what features that Delta offers they want," Hauenstein told investors. Said Jeff Klee, founder of CheapAir.com, an online travel agency: "I absolutely think this is the new normal. It is kind of sad - things we now consider perks used to be given for free." But overall, he said, the trend is a positive one, opening the door for cheap travel for more people.

Others disagree. "I don't see an upside, to be honest," said Zach Honig, editor at large for The Points Guy, a travel advice website. "It's great for airlines and their shareholders, either from people buying up or paying [extra fees] later, but it's a no-win for customers. The airlines will suggest they have lowered fares, but they haven't. They are the same economy fares as before."

It is hard to know how much airlines make, since they are required to report revenue only from baggage, cancellation and change fees. In 2017, U.S. carriers made $2.2 billion on those fees alone.

But there's no denying that a la carte flying has proved profitable. According to the report released by Nelson, basic economy fares contributed roughly $20 million in incremental revenue for Delta during the first quarter of 2016. United said it expected adding a no-frills fare option would lead to $200 million in incremental revenue in 2017.

For larger carriers, the shift to charging for options that were once included in the price of a ticket began nearly a decade ago in 2008, when a spike in fuel prices prompted American Airlines to begin charging baggage fees. Other airlines followed. Airlines soon discovered they could charge for other services - early boarding, extra legroom, premium seats.

Public sentiment has been mixed. "Providing you the option to customize your trip is a good thing, but I also worry that airlines use this as an excuse to give you few things for the same price," said District resident Maggie Brown, 33, who works for a trade association and flies traditional and discount carriers.

Ike Smith, a 29-year-old consultant from Fairfax County, Virginia, said that "if it's cheap enough, it might be worth it." The shift has made it even more important for travelers to pay attention when booking flights, Klee said. "It does make the process of buying a ticket much more difficult," he said. "It's very hard to make sure you're comparing apples to apples."

His website, CheapAir.com, does its best to differentiate between standard economy fares and basic fares, listing for example whether there are extra charges for carry-on bags, advance seating assignments, priority boarding or ticket changes.

A recent search for a round-trip ticket between Baltimore-Washington International Marshall Airport and Los Angeles International via United yielded three options: a basic economy seat priced at $307, economy at $334 and economy flex (a refundable option) at $457. But the basic economy price did not include the cost for seats with more legroom ($99 to $119 on the outbound flight; $34 to $95 for the return flight), priority boarding and check-in options ($88) or baggage charges ($25 for the first bag, $35 for the second).

A passenger flying basic economy on United who brings a large carry-on, in addition to a small personal item, will be charged an extra $50 - the standard fee of $25 and an additional $25 for checking it at the gate.

A few months ago, Smith, the consultant from Fairfax, was headed to San Antonio to meet friends. He used Google Flights to check airfares and spotted a cheap ticket on Delta and clicked "purchase."

"I just thought it was a really good deal," he said. It was only when he tried to pick his seat that he realized it was a basic economy fare.

But it wasn't so bad. On the way to Atlanta, he ended up in a "premium economy" seat toward the front of the plane. The connection to San Antonio was fine. But on the trip home he was assigned a middle seat toward the back of the plane. There was less legroom and the seat had less cushion than those closer to the front, he said. Given his recent experience, however, Smith said he'd book basic economy again.

"Fortunately, it worked out great for me," Smith said, "but I know there are stories where people think they're getting a great deal and then once they add all the other extra fees, it's not that great." As for Zwirn, he ended up rebooking the tickets so he could guarantee his family would be seated together. The cost was nominal - only about $60 more - so it was worth it.

And that's what the airlines are counting on - that given the option, travelers will opt to pay more.