Air Canada Launches New Economy Fares to Compete With Low-Cost Carriers

Air Canada introduced a new basic economy fare earlier this year that – like similar products at American, Delta and United – offered reduced perks in exchange for a slightly lower ticket cost. As an extension of that effort, the airline this week launched an additional fare to further divide up the main cabin into tiers and benefits.

Initially, Air Canada’s economy fares were set up in basic, standard (or Tango) and flexible tiers. Basic economy on the airline offered sparse amenities compared to other carriers; in addition to no changes, refunds or upgrades offered when flying in the fare class, travelers also didn’t earn frequent flyer miles. Standard fares were for mainstream travelers, while Flex fares gave the most benefits to casual travelers. A separate, more flexible Latitude fare was also offered for corporate travelers.

This week’s changes add Comfort fares to the equation as well as a tiered order to the perks and flexibility of each fare class. Latitude fares will continue to offer the greatest flexibility and perks for each traveler while Comfort and Flex will offer, respectively, fewer perks with each step down. Standard (formerly Tango) and basic economy fares are on the lowest tiers; on standard fares, for example, travelers only earn 25 or 50 percent of frequent flyer miles while a Latitude flyer earns 125 percent. Basic economy passengers earn none.

Air Canada paints the new series of fares and tiers as a vehicle to “satisfy every customer’s travel needs,” which has been a commonly used narrative to launch and justify basic economy fares. And to a degree, that story rings true. Multiple low-cost carriers have brought international service to the United States in the last few years while Spirit and Frontier, the two dominant low cost players in the country, have flourished. For those simply purchasing by price. Air Canada’s basic economy fares, like American’s, Delta’s and United’s, should compete well with low-cost carriers.

Beyond the basic economy fares though, with the recent fare restructuring, Air Canada seems to be jumping onto the trend of compartmentalizing its economy cabin and extracting revenue at each tier. In the United States, Delta Air Lines has perfected this approach, offering up to six different classes on its range of flights. By applying this method, Air Canada will now be able to sell miles to frequent flyers, flexibility to business travelers and extra legroom to the leisure travelers. In the end, the only losers may be the travelers who can’t tell the difference between the tiers at booking.