Airlines have long seen profitability in investing heavily in first- and business-class while degrading the flying experience in coach to cut costs. But why stop there? Coach, they have discovered, can itself be subdivided, and then subdivided again. First there was the creation of premium economy, which charges passengers extra for what used to be a standard amount of legroom, and for the exit-row seats that were previously the dominion of in-the-know flyers. Now there is a new class, a cut below standard economy. Please welcome "basic economy", known to some as "last class".

(i) What is the economic logic of creating "basic economy" class, in addition to "standard economy" and "premium economy?" (ii) What is the key for this pricing strategy to be a success?