The airlines have rethought it. Now you should, too, with fares up to 74% less than they were last month
[aside headline="Overview of Fare Restrictions on the New Domestic First Class Fare" alignment="alignright" width="half" headline_size="default"]
- Advance Purchase: Ranges from 14 to 21days.
- Booking Window: Reservations can only be done within 90 days of departure.
- Minimum and Maximum Stay Rules: Usually none.
- Cancellation and Change Fees: Ticket is-nonrefundable and has a $150 change fee for the departure or return, plus fare difference (if any).
- Booking code for American:P
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[aside headline="The Great Unbundling and Rebundling of Flight Products" alignment="alignright" width="half" headline_size="default"]
Catching the Airlines in the Act
Act One: Coach Market Unbundled
To raise revenue, the airlines started charging for things that formerly were included in the fare—like checked bags and meals.
Act Two: Loyalty Status Perks Unbundled
The perks given to the frequent traveler—separate checkin and boarding, dibs on the best coach class seats—are now being sold, diluting the value of the perks and the loyalty.
Act Three: First Class Fares Cut – Happening Now
It was only a matter of time before airlines took the process to the First Class seat and the chief way of getting them. Elite and mileage upgrades and free mileage awards are now in the crosshairs, which will impact elite status travelers fervent about getting last-minute elite upgrades, and travelers collecting miles to use later for upgrades or free awards.
Act Four: First Class Fees – Coming Soon
It won’t be long before some First Class fares or upgrades will require you to pay extra for the little things mentioned above.
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As we reported in an FCF Alert on June 13, the domestic First Class Fare War is heating up. American Airlines has entered, guns blazing, and, on some routes, is even undercut-ting Delta, which up to now has been the heaviest discounter of domestic First Class fares.
But this is more than a fare war. It represents a radical re-thinking by the airlines of “The Economy of the First Class Cabin,” and it is going to require a corresponding rethinking on your part in how you book domestic First Class.
The Backstory
Over the past few years the airlines have been unbundling and then rebundling the flight and fare package, starting with coach. Now the movement has reached the front cabin.
For many years, domestic First Class fares have been so high that many who flew First Class never even considered paying for the ticket. Instead, they relied on strategies such as mileage loyalty programs (upgrades and free awards) and elite status to get into First Class. Which was fine in a boom economy, however, the downturn since 2008 has caused corporations to reduce business travel and tighten up on expenses. One result is that many domestic First Class seats are going unsold, which has forced airlines to start repricing the First Class cabin, not just First Class on certain routes.
The New First Class Pricing Dynamic
With its new First Class fares, American is not only undercut-ting other carriers’ First Class fares by up to 40%, but also its own by as much as 74%. What makes American’s new First Class fares stand out is that they include longer domestic flights, among them Los Angeles New York, where American has always charged a premium for First.
Now, American charges about $900 round-trip to fly Los Angeles New York, LaGuardia. The same itinerary on United or US Airways costs about $3,000. The difference is equal to two tickets at the new price.
“This latest incarnation of First Special is part of our drive to return American to its position as a world-class global airline that is competitive,” according to the American Airlines media department.
We’re not sure if that’s going to hap-pen, but one thing is clear: American cut its First Class fares by up to 74%; our question is whether the carrier knows the difference between worth and cost.
High fares fostered the idea that First Class was worth a lot. Once an airline cuts the price, it also undercuts that idea. Why was First Class from Los Angeles to Dallas worth $1,238 a few months ago, but is only worth $726 now? That’s what premium travelers are going to think, just as they did when luxury brands radically cut prices in the panic months of 2008.
In other words, once you cut First Class fares up to 74%, it’s difficult go back and expect passengers to pay the old fare for the same product.
Comparing Old and New American Airlines First Class Fares (Round-trip)
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The New Dynamic Requires New Thinking
Elite Travelers: Forget elite upgrades on American unless you are top elite (Platinum or Executive Platinum) and you do not have to buy the 500-mile certificates to upgrade. With more passengers able to afford First Class, the free elite upgrade inventory is going to shrink greatly. Why gamble anymore?
For example, on Los Angele’s Dallas a First Class ticket is about $726, the economy ticket is about $400, and the cost to buy six 500-mile upgrade certificates is $180. The difference: by paying the extra $146, you buy peace of mind—that’s only from four cents a minute for a six hour flight in First Class.
First Class Mentality for Elite-Status Travelers
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Mileage Upgrade Traveler: On many domestic routes it doesn’t pay to use miles anymore for an upgrade, given the cost of replacing them. Save them for high-priced routes such as Hawaii or for international travel.
Using Los Angele’s Dallas as an example again, an upgrade-able economy ticket costs about $385 on American, plus the $150 co-pay, plus 30,000 miles, which have a replacement value of about $825. That brings the total mileage upgrade ticket cost to $1,360. Paying for a First Class ticket costs $726, so the mileage upgrade is actually costing you $634.
New First Class Mentality for Mileage Upgrade Travelers
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Free Mileage Award Traveler: The same situation as mileage upgrades applies. Keep the miles for when ticket prices are high. On Los Angele’s Dallas a round-trip First Class ticket is $726. It takes 50,000 miles for an award ticket, giving you a return on miles of about 1.5¢, which is lousy considering it costs almost double to replace them.
New First Class Mentality for Mileage Upgrade Travelers
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