American Airlines (AA) - current titleholder of "World's Largest Airline" - is set to compete with ultra-low-cost carriers in 2016, introducing a "no frills" fare choice, USA Today reported.
AA President Scott Kirby and fellow executives revealed the plan to analysts Friday, as strictly a cost competition on overlapping nonstop flights. Identifying the rivals, Kirby named such low-cost carrier stalwarts as Spirit and Frontier and also mentioned international carriers - Mexico's Volaris and Europe's Norwegian, USA Today said.
Kirby pointed out that 87 percent of American's passengers fly just once annually, but comprise half the airline's revenue. "Given that 50 percent of our revenue is up for grabs in these markets, and these carriers have had so much success when they weren't matched, we know that we have to match their fares," Kirby said, per USA Today.
AA's no-frills plan has similarities to Delta's "Basic Economy" fares, introduced in 2012, USA Today said, and specifics of Delta's plan could be a preview of what AA will offer: the fares are non-refundable, no changes are allowed and seat assignments are only allowed after check-in, pending availability, according to USA Today.
The ascension of low-cost carriers played a major part in AA's no-frills fare introduction, USA Today indicated, saying that before AA declared bankruptcy in 2011, Spirit served three markets from Dallas/Fort Worth (DFW). Currently, the carrier serves around 24. Spirit also has a strong presence in Chicago, serving about 20 destinations with nonstop flights.
"Spirit at DFW is our No. 2 competitor - they are larger than either Delta or United," Kirby said, per USA Today. They represent a "huge market share," he asserted.
Statistics indicate, via USA Today, that AA provides 70 percent of available domestic seat miles from DFW, versus Southwest's 16 percent and Spirit's four percent - numbers that seem to put AA firmly in first place.
But Kirby insisted that the only relevant statistic is that Spirit represents 20 percent of AA's overlapping nonstop competition out of DFW.
In fact, Kirby said low- and ultra-low cost competition affects 85 percent of AA's domestic markets, according to USA Today.
Analysts wondered if AA "was diluting its more elite reputation by matching the lowest fares, if business travelers would never fly an ultra-low-cost carrier," USA Today said.
But Kirby indicated that the frills weren't going anywhere, saying per USA Today that fliers willing to pay a premium can still have access to lie-flat seats and other amenities.
CEO Doug Parker assured the analysts that the airline has everything under control.
"We will compete on non-stop service," Parker said, according to USA Today. "We're extremely comfortable with what we're doing."
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