Originally Posted by
emma69
That isn't a true premise.
The economy seat is $500
The full class business is $1500
The 'discount' business you propose is $1000.
But the company will still only pay $500. Thus $500 + good chance of upgrade is far more valuable to those elite passengers flying on the company dollar (where economy is mandated at least for short routes - and that is a huge number of companies these days) than the 'cheaper' business fare, which would cost them $500 out of pocket (assuming they can still get the company to pay $500 for economy, even if they fly business, which again, not all companies allow, nor do all airlines allow changes to flight class without penalty). Buy economy (on company dollar) and fly business, say 50% of the time (I think 85% is far too high) for $0 cost to the individual, or buy economy (on company dollar) and fly business 100% of the time, but at a cost of $500 each and every time to the individual which, if they fly 3 times a week, is in the region of $75k. I know which option I would go with!
I see your point that a certain proportion of corporations are not going to allow their employees to pay for 1st no matter how much cheaper it is than other airlines, and those people are going to try to find a frequent flyer program that is going to allow them to upgrade as much as possible off of coach tickets.
To make it clear now, so that you guys don't nitpick: like I said, airlines could implement this program intelligently, and one of those factors would be that they would still want to give consistent upgrades to full fare travelling elites to encourage their full fare business. This is standard revenue management. On flights with a lot of full fare travelers, you set the price of 1st class seats higher to accommodate more full fare upgraders.
It would obviously be a trade-off in terms of the passengers that you are attracting. But to me it seems like the passengers you are attracting are the frequent flyers who are willing to spend more money on their fares. Which seems like a good demographic for an airline to go after.
And my numbers are hypothetical. The point is that you would price the elite discount 1st class at enough of a premium over economy that it was worth taking the money vs upgrading someone for their loyalty, and also attractive enough to enough flyers that they would be loyal to your airline and pay that premium rather than join some other frequent flyer program and get free upgrades X% of the time.
I was an economics major in college and to me this is just an interesting pricing situation. Its almost like "the welfare trap" where people work less than they would because if their income stays below a certain amount, they can make more money in welfare. With airline top tier elites, they pay less for their tickets then they would because they have too good of a chance to get a free upgrade to justify the price multiple on 1st class tickets.