American Airlines has rolled out a revamp of its fare structure, offering fliers a choice of three coach-class fare types that come with varying degree of perks and benefits.
Travelers opting for the cheapest coach fares will still be subject to change fees of $150. Non-elite customers also will continue to pay for checked bags when they choose the cheapest, most basic fare. (Read more: Add-On Airline Fees: Good or Bad?)
Passengers willing to pay a bit more, however, are now able to purchase fares that include change-fee waivers and come with options including a free checked bag, priority boarding and bonus frequent-flier miles.
American also will continue to offer high-priced "fully flexible" and "first/business class" fares.
As for the new coach fares, George Hobica — founder of airfarewatchdog.com — calls it "a big deal" because bundling the cost of baggage with a ticket will also provide priority boarding and protect against change fees for a bit more.
"I think a lot people who are going to pay $50 round trip for a checked bag, paying the extra $18 for no change fees is certainly a win for consumers," Hobica said.
"It's going to make fare comparisons harder in a way because it's more shopping around that you'll have to do in comparison," Hobica said. "The priority boarding line is going to stretch to the terminal door."
"I think it's fascinating. I'm glad to see American Airlines innovating again," Hobica said. "It's surprising they did this considering all their woes. They have so many other things distracting them."
American is providing the information to travel agents, but the only place to find the packages initially will be through the airline's website aa.com.
Rick Elieson, American's managing director of digital marketing, says the airline had a head start in designing its site with all the choices. American has given directions to agencies about how to price the options, but Elieson says it may take some time for others to be able to offer the choices.
"Everybody is going to have access to them," Elieson says. "I had a head start. Online agencies are going to have to do that work themselves… They're going to have to figure out how to add that dimension to their displays."
Elieson says the goal is to avoid riling customers while charging for the products – and sell more of them.
"I want to create a compelling product and I want that product to sell," Elieson says. "I hope it makes the travel experience easier, not just shopping."
Elieson adds to The Associated Press that he hopes the new options will help dampen customer complaints about change fees — typically $150 for domestic flights, plus any difference in fare.
"This will eliminate the fear about what-ifs," Elieson says to AP, suggesting it will prod customers to compare airlines by quality and reward ones "like American, that invest so much in its product."
Henry Harteveldt, travel analyst with Hudson Crossing, said the choices will steer more customers to American's website and travel agencies such as Priceline.com that have the technology to deal with the choices. American also has other choices — such as its "preferred" and extra-legroom seats — that aren't part of these new tiered fare packages. (Read more: Government Can't Stop Airlines From Charging Seat Fees)
"This is definitely a move that is designed to help American to sell more tickets through its own website," Harteveldt said.
Harteveldt thinks the strategy has two goals. One is to shift the customer's decision-making from price to value. The other is to prove to creditors that the airline reorganizing in Chapter 11 bankruptcy court is viable on its own.
"It does provide good value," he said.
"These travel options are another example of how we're building toward a new, innovative and more modern airline," Rob Friedman, American's Vice President – Marketing, said in a release announcing the changes. "With our renewed customer focus, we've designed these choices around what our customers tell us will make their travel most enjoyable – more flexibility and benefits that give them the most ease and convenience."
The new tiered fare structure includes the following fare types:
This is the lowest available fare, which is good only for a seat on the flight. AA notes that customers traveling on Choice fares have "the flexibility to purchase additional products a la carte."
- Choice Essential
This fare type costs an extra $68 round trip and allows customers to make changes to their itineraries without the customary change fees (fare differences still apply, however). Choice Essential fares also permit 1 free checked bag (or a third checked bag for elite frequent-flier members) and Group 1 Boarding.
- Choice Plus
Costs an additional $88 round-trip. Perks include: No change fee, one checked bag (or third checked bag for elite frequent-flier members), Group 1 Boarding, 50 percent AAdvantage mileage bonus, free same-day flight changes, same-day standby option, and a premium beverage, such as an alcoholic beverage onboard.
- Fully Flexible
Fares vary. Perks include: refundable fare, two checked bags, Main Cabin Extra/Preferred Seats, PriorityAAccess, same-day flight change, same-day standby, eligibility for fliers to use their 500-mile upgrade certificates (upgrades available after AAdvantage elite status members have been confirmed).
Fares vary. In American's words: "The lowest Business Class or First Class fare, including Instant Upgrade fares, is visible on the Lowest Fare tab. Customers booking Business and First Class fares will receive all the benefits they have come to appreciate, including priority baggage handling, up to three checked bags and PriorityAAccess."
American's new fare structure comes ahead of possible action by the Department of Transportation, which is expected to propose a rule early in 2013 that could force airlines to sell more of their fees for things like baggage or seat assignment with their fares through third-parties such as travel agents. Airlines, which prefer to have customers buy tickets on their own sites, have opposed that prospect.
Charlie Leocha, a member of a DOT committee for consumers that supports such a rule, said American is demonstrating how airlines will package their products if they are forced to include fees with airfares. But Leocha says he doesn't think American's voluntary pricing will prevent the federal rule.
"I don't think it'll short-circuit the rule," said Leocha, director of the advocacy group Consumer Travel Alliance. "If they are doing it all voluntarily, they won't have any reason to protest the rule."
Robert Mann, an airline analyst with R.W. Mann & Co., said Air Canada set the gold standard in 2005 by packaging its service by fare type. He said this strategy is more positive — regardless of any looming federal rule — in linking airfares with fees than essentially offering to sell customers a car while charging extra for tires and steering wheel.
"It's selling different flavors of the same seat, but with very different characteristics," Mann said. "I think they're concluded this is a better way of doing it."