More than half of the passengers who look at their no-frills basic economy fares at American Airlines and United Airlines are buying higher fare classes, Wolfe Research analysts report.
American sees an upsell rate of roughly 50%, and United a rate of up to 70% for bookings on its own website and roughly 50% on third-party sites, executives from each carrier told Wolfe analysts in meetings on 23 and 24 May.
Basic economy fares at both carriers lack frills, for example passengers cannot carry on a bag for the overhead bin nor can they select seats. Higher fare classes include these amenities as well as others.
While American and United have sold their basic economy offerings as responses to ultra low-cost carriers, Wall Street analysts, including those at Wolfe, characterise the fares as a de facto fare increase by pushing many passengers into higher price buckets.
American and United both expect to generate about $1 billion in additional revenue from wider cabin segmentation initiatives, which include basic economy fares, by 2020.
Fort Worth-based expects to realise up to 20% of its $1 billion incremental revenue target this year, according to Wolfe.
The airline sells basic economy in 19 markets with an expansion to more due this month, they add.
Chicago-based United is selling basic economy in 400 nonstop markets and 20 connecting markets, executives told Wolfe.
American and United plan to offer basic economy in all domestic markets by the end of the year, and plan to expand it to select international markets after that. They both began selling the fares on 21 February.
Delta Air Lines has offered a no-frills basic economy fare since 2015.
Source: Cirium Dashboard