Originally Posted by
hjohnson
Alas, if only the beancounters at AC saw it that way. I suspect they see every upgrade as a J ticket unsold, rather than as an extra Y seat. In their math, 2 Y tickets probably brings them $3500 or so, while a J ticket would have brought in $6k, plus the extra $2500 for the Y seat.
Rightly or wrongly, given the attitude we seem to be seeing, this is what they seem to be basing this on.
Which is why AC is actually losing the business of many formerly loyal customers who no longer see any personal cost/benefit to them flying AC vs its competitors (or even alliance partners).
$6K isn't $6K when the J seat goes out empty (which it often does if not for upgrading), and that economy seat doesn't get sold twice. So in fact, that J seat becomes a loss of $7,750 under your scenario (and AC's bean counters if indeed that's how they see their false economies).
You can't ascribe a value to an unsold good, which is what the unsold J seat is. It's a perishable good and actually has a cost for going empty because it raises the overall yield required from each sold seat. As AC itself acknowledges, it oversells flights in economy knowing that there will be enough open seats to accommodate the oversell in most cases. Part of that equation comes from knowing there will be upgrading to any empty J seats. If AC's bean counters see it the way you've said, then they are deluded because their seat managers can tell them how many unsold J seats there will be on any given flight so by knowing how many elites are in economy and the ratio of potential upgrade requests (based again on previous experience for a given flight) they know there are extra economy seats to be sold. (We won't get into the economics of bump fees.)
So I still contend that "Bottom Feeders" are more beneficial to AC (or any airline) than any other group beyond your corporate accounts. They provide a steady annual stream of revenue (small compared to corporate fliers but large compared to the once-a-year fickle flyer who only wants to pay the lowest fare. And they are really low maintenance in the long run.
As any business knows, it's far cheaper to keep an existing customer than to try to attract a new one. There was a reason they called them "loyalty programs" in their early days. (Of course, among many today there is no such thing as loyalty, either from the customer or the corporation. Some of us are just old fashioned dinosaurs though. As for me, I did have loyalty to AC in part because they gave me a summer job when I went to university and thus paid my way to a post graduate degree that set me on my life path. However, that loyalty has been significantly eroded by this management/executive team's actions over the past couple of year.)