American Airlines, one of the biggest airlines in the world, is canceling its policy that prevents its passengers from bringing carry-on luggage.
The airline's Basic Economy passengers will finally be lifted out of the additional charges of their carry-on bags as the new policy starts on Sept. 5. It has been a year since the carrier has introduced the cheap fares in exchange for stripped-down services.
Basic Economy Fare
The bag-less economy fare is known to be one of the most famous restrictions of the airline. According to the carrier's executives, it was not similarly competitive with the offers of other airlines. Furthermore, it pushed the visibility of the company lower in airline searches where potential passengers hope to see a fare with carry-on luggage included.
Doug Parker, American Airlines CEO, stated that the airline has gotten to a point where it lost competitiveness for price-sensitive customers who are the fare's target buyers. There is also a big airline out there who does not bill passengers for their carry-on, he said, referring to the carrier's rival Delta Airlines, which offers people free carry-on bags in its basic economy fare.
Parker added that lifting the restriction is the best thing to do to get fair with competitors. Executives of the airline are keeping their fingers crossed that the change will result in a revenue growth.
Decreasing Sales
Currently, American's sales are dwindling down compared to its peers. Fuel costs are also increasing, which adds a staggering estimate of $2 billion in its yearly expenses this 2018.
Parker said that the combination, coupled with a technical outage that happened in June, led to 3,000 regional flight cancelations. He said that it was the most challenging quarter since its 2013 union with US Airways.
The airline has reported a second-quarter revenue of $566 million, which is a dumbfounding 34.5 percent decrease from the same period last year.
Don Casey, American's Senior Vice President of Revenue Management, said that elevating the performance of the airline's basic economy could raise the revenue to as much as $100 million annually.
Around 63 percent of people who have been presented with the basic fare ended up paying more for a regular economy fair, added Casey. American expects the figure to decrease to 50 percent as fewer people buy up.
The basic economy offer is a vital part of the airline's wider strategy to segment its plane cabins by offering many types of fares with different price point and amenities.
This targets air-travelers who are budget-conscious or are willing to spend more money just to get a wider legroom and a more effective range of service.
