Branded fares: US value-add hybrid airlines work up basic economy


Branded fares have become a mainstay in US airline discourse as the country’s largest global network airlines, American, Delta and United work to capture their projected revenue targets from a new phase of product segmentation. Now the country's value-add, hybrid airlines – Alaska, Hawaiian and JetBlue – are crafting their own basic economy offering to compete more effectively and drive up their respective revenues.

Alaska is the most advanced of the three hybrids, having fully rolled out its Saver Fares out across its network in early Jan-2019. Its lowest tiered fares are one pillar of the company’s plans to generate millions in new revenue this year. 

Both JetBlue and Hawaiian plan to introduce a lower fare level in 2019 and those operators, along with Alaska, are no doubt betting on garnering a definite level of upsale to drive revenue growth in the future.


  • Alaska Air reiterates its forecasts of generating USD100 million in revenue from its “Saver Fares” in 2019.
  • Hawaiian Airlines is facing competitive capacity headwinds as it works to align its pricing with competitors offering basic economy fares. 
  • JetBlue remains quiet on its basic economy fares, but is working toward a late 2019 debut. 

Alaska engages in full roll-out of Saver Fares in selected markets 

Alaska Air Group outlined plans to create its Saver Fares in 2018 and engaged in a soft roll-out of the fares in a small subset of markets in Nov-2018, for travel in Dec-2018. 

Company executives recently concluded that those trials had gone smoothly, and after making some refinements to the technology they introduced the fares system-wide on 7-Jan-2019. 

The fares prohibit seat selection, place the passengers in the last boarding group, and do not allow for changes to an itinerary. But customers can accrue miles with Saver Fare purchases.

Obviously, Alaska remains in the early days of implementing its Saver Fares, but the company is sticking to previous estimates that the fares will generate USD100 million in revenue this year (2019). 

Alaska has also previously stated that it is planning to generate an additional USD50 million in revenue in 2019 through the use of dynamic pricing for Premium classes, offers of exit row seats for sale, by improving its post-sale revenue management, and by eliminating fee waivers for ticket changes outside 60 days.

The airline has also calculated that its recent bag fee increase, which raises the rates on first bags from USD25 to USD30 and on second pieces of luggage from USD25 to USD40, should also produce USD50 million in revenue during 2019. 

Alaska is also planning several product improvements in 2019, including deploying satellite Wi-Fi with higher bandwidth on 125 aircraft and the installation of next generation interiors on a third of its mainline fleet. 

Aside from solid revenue generation, Alaska also believes that Saver Fares can help combat some weakness in Hawaiian markets. Company executives have calculated that industry capacity between the US and Hawaii increased 8% year-on-year during 4Q2018. They have also stated that yields were down year-on-year, affecting the company’s quarterly unit revenues by 125 basis points.

Despite those headwinds, Alaska posted a 5.2% increase year-on-year in 4Q2018 unit revenue, which its executives acknowledged was the largest increase posted by the company in several years. 

Basic economy and industry capacity growth create headwinds for Hawaiian 

Hawaiian Airlines is also feeling the effects of elevated industry capacity between the US mainland and Hawaii. Company executives recently highlighted that competitive capacity had increased 11% on its North American routes (the bulk of which are to the US West Coast) during 2018, and those markets represented 52% of its revenues for the year. 

The airline’s passenger unit revenues fell 4% year-on-year during 4Q2018 and 1.4% for the full year, and yields for those respective periods decreased 2.5% and 0.8%, reflecting what company executives described as a strongly competitive pricing environment in North America

Hawaiian is forecasting that pricing pressure will continue into 1Q2019, which has typically been a trough period for the airline. 

The company can offset some of the pricing pressure from its own evolving line of fare families. During 4Q2018, Hawaiian netted USD23 million in revenue from its “Extra Comfort” product, which was a 31% increase year-on-year. 

Hawaiian also plans to introduce its own version of basic economy in 2019, likely closer to year-end. The airline has not offered a specific revenue it expects to generate from its version of basic economy, but its decision was no doubt driven by American, Delta and United offering the fare class on competitive routes with Hawaiian; for now, Hawaiian has no comparable product. 

Hawaiian and its existing competitors on routes from Hawaii to the US west coast will gain a bit of a reprieve from Southwest’s market entry: the 35-day partial US government shutdown in late 2018 and early 2019 resulted in Southwest facing delays in gaining necessary certifications to operate over water routes to Hawaii.

But once Southwest enters an already competitive market, new pricing pressure will emerge. 

JetBlue readies its latest iteration of fare families for a 4Q2019 debut 

JetBlue plans to debut its Blue 'Save' fares in 4Q2019. The airline has not revealed specific details about the offering but has previously declared that the lower tier fare offering is part of its 'Fare Options 2.0'. The company has pledged to lower fares without sacrificing the experience and estimates that customer segmentation, loyalty and JetBlue Travel Products should add USD35 cents to USD55 cents to its 2020 earnings per share.

No new details have emerged about JetBlue’s Saver Fares or its Fare Options 2.0, except that the airline plans to take a measured approach to deployment.

“We'll test and learn in individual markets, just like we do with pricing today. It's sort of normal course of business for us, just with different bundles”, company executives recently explained. 

US value airlines adjust to new competitive realities with Basic Economy

Perhaps the unwritten message in Alaska, Hawaiian and JetBlue’s decisions to join their larger US counterparts in offering a basic economy is the ability to drive upsales aimed ultimately to bolster their revenues. 

Even as American joined Delta in waiving the carry-on bag restrictions in it basic economy offering, the US major recently declared its average upsale rate for basic economy continues at broadly 60%, which has exceeded American’s initial expectations, and the upsale amount is now approximately USD26, which is a USD5 increase. 

Those figures have no doubt captured the attention of the smaller US competitors Alaska, Hawaiian and JetBlue, who cannot ignore the potential revenue upside of driving passengers towards higher fare tiers. 

Want More Analysis Like This?

CAPA Membership provides access to all news and analysis on the site, along with access to many areas of our comprehensive databases and toolsets.
Find Out More