Why Delta Air Lines, Inc. Just Reshuffled Its Fare Options

By Markets Fool.com

On Monday, Delta Air Lines announced that it will change the names of most of its "classes" of service. It will also make a few changes to the amenities included with each class.

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Delta has renamed three of its major fare tiers.

To some extent, Delta's changes are designed to create more differentiation in customers' eyes relative to its legacy carrier rivals. However, an even more important goal is to better differentiate Delta's different classes of service from one another and resolve some of the confusion that has crept into airline cabin names -- especially at Delta -- in recent years.

The new system
Under Delta's new system, passengers will buy tickets for one of five "branded" classes of service. At the bottom is "Basic Economy," a relatively new fare class that is only available in a few dozen markets. Basic Economy fares are the lowest available on Delta, but they do not allow advance seat selection and provide no flexibility for flight changes or upgrades.

Delta's regular economy class has been renamed "Main Cabin" for both domestic and international routes. Meanwhile, the premium economy product has been renamed from Extra Comfort to "Comfort+".

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Delta's Comfort+ seats, as well as all premium cabin seats, will receive new quilted seat covers. Source: Delta Air Lines.

The premium cabin on domestic and short-haul international flights retains the "First Class" designation. For long-haul international flights and transcontinental flights from New York to San Francisco and Los Angeles, the premium cabin will be called "Delta One" rather than BusinessElite. Delta One features full flat-bed seats and a variety of premium amenities.

In order to bolster customer awareness of these service tiers, all Comfort+, First Class, and Delta One seats will be outfitted with new quilted seat covers.

Differentiating in Coach
Today, Delta sells three different fares with "economy" in their names. There's the "Basic Economy" low-fare option on certain flights, there's the regular "Economy" class, and then there's the extra-legroom "Economy Comfort" section. Using the word "Economy" across all three seating options emphasized the similarities between them.

By contrast, Delta is now emphasizing the differences by retaining the "Economy" name on only the bottom-tier fare class. In theory, this could help Delta segment the market more effectively, getting less-price-sensitive customers to pay extra for Comfort+ while using Basic Economy to target bargain-hunters.

Selling the premium experience
An even more important change was renaming BusinessElite as Delta One. In recent years, airlines across the world have upgraded their international business class cabins with full flat-bed seats to attract premium traffic. These seats are lavish enough that very few people are still willing to pay for an even more expensive international first-class seat.

Accordingly, many airlines have downsized their international first-class sections, or offer them only on certain strategic routes. Delta has gone even further: It eliminated all international first-class seats years ago.

However, this created a bizarre situation in which Delta's BusinessElite seats (offered only on long-haul international flights) are more upscale than its First Class seats (offered only on domestic and short-haul international flights). Delta frequent fliers know which is which, but for a new customer it could be confusing.

By renaming the international premium cabin "Delta One," Delta is making it clear that this is its most exclusive seating option, with more space and more amenities than domestic First Class.

Thus, there are good reasons behind Delta's decision to rename its fare classes. Whether the new differentiated names have any impact on the bottom line remains to be seen, though.

The article Why Delta Air Lines, Inc. Just Reshuffled Its Fare Options originally appeared on Fool.com.

Adam Levine-Weinberg has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.