"Basic Economy": A new gimmick by airlines?

Hello monkeys,

I’m sure plenty of you here are often frequent flyers due to the nature of your job as consultants or bankers. I understand that most of the fares are usually paid by your firm, but nevertheless, I think the following article is an important issue for many of us! How ‘Basic Economy’ Actually Makes You Pay More to Fly

Typically $15 to $30 lower than traditional economy, these tickets are designed to allow American, Delta, and United to better compete with ultra-low-cost carriers such as Frontier Airlines Holdings Inc and Spirit Airlines Inc. They target travelers for whom price is more important than convenience, since they carry a pile of additional restrictions—no advance seat assignments, last to board, no changes or upgrades. (And, on United Continental Holdings Inc., no access to overhead bin space.)

Sounds like a good tradeoff, isn’t it? But here’s the magic that these airlines worked out:

While adding these new bargain-basement fares, carriers also raised prices on traditional economy seats. The strategy? If a consumer sees that there’s an even lower class, they’ll pay a little more for the next level up. In other words, this is where basic retailing goes airborne.

The strategy is similar to the ones that fancy restaurants often use with their wine list! Charging exorbitant high prices for some wines and dirt-ass cheap prices for some wines, while marking up their “medium” price wines.

Here’s what a banker has to say about the new strategy that carriers are employing:

Basic economy fares are often unavailable on corporate-travel booking systems because business travelers require more flexibility. As a result, the new class is “a corporate fare increase by another name” JPMorgan Chase & Co. analyst Jamie Baker said in a December client note. (He’s a fan of the strategy, though.)

What do you monkeys think?