Alaska looking at $100mn in "upsell" revenue opportunity, including basic economy
Jan 25, 2018, 9:53 pm
#31
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Jan 25, 2018, 9:56 pm
#32
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well, if you look at some of the BE threads in the UA forum, for example, you will find that BE didn’t generally result in cheaper fares. The old economy fares became BE, and the new regular economy fares were higher. Obviously, fares aren’t static forever, but perhaps compare legacy carrier BE fares with ULCC fares on routes were they compete and see if they now match the ULCC fares (they didn’t when I looked a while ago).
Lately it's been rare for me to find that AS is the cheapest option on anything I'm looking to book. I stick with Alaska because of status and MileagePlan, but if the choice is between basic economy on DL and AS, I don't see why I wouldn't book DL if they are cheaper than AS. Basic Economy erodes the benefits of status and the FF program... at that point, AS is basically telling me to book on DL.
Jan 25, 2018, 10:23 pm
#33
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I have flown mileage runs with just a backpack, too. Even internationally. But I think your example is probably not a very common one (neither is mine for the general traveling public). I am always amazed about the steamer trunks that people try to get on the rental car shuttle at LAS when I just have a small rollaboard. What are they doing that I am not doing?
Jan 26, 2018, 1:57 am
#34
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They talk about segmentation a lot, but that can involve capturing both higher as well as lower segments of the market. Several times they mentioned reconfiguring the VX planes, which means putting Premium Class and a reasonably-pitched First into the Airbuses and actually being able to sell those seats. W to a segment of folks who’re willing to pay $15-$60 more for some extra legroom, and F to both segments of elites who might pay 1.5x for an instant upgrade, as well as some wealthier folks who would pay 2x to just book directly into F. Capturing all of those is as important as whatever they might make by introducing BE. VX only had 12 MCE seats on each plane, and from my experience, they never sold out before they were discounted at check-in. And almost nobody was paying $1800 to fly VX F for 5 hours, especially once the big 3 and JetBlue were selling beds for half that. Alaska would rather have $100-400 of actual money than a huge, massively-pitched recliner with theoretical $1500 markup, but that flies empty.
I'm sure they'll do something to capture down as well, likely a BE, hopefully less punitive as what the big 3 are doing, but it could be something else even more gentle, like introducing a fee for all advanced assigned seats. That would also allow them to introduce bundles at booking, like $30 for an assigned seat and a checked bag. (“Save $10 when you buy both together! Oh, the savings!”) And waiving that fee could be another way to “add” value to the 20K-mile MVP tier and/or credit card. Frequent flyers would barely notice, but they might get an extra $15 x 4 people x round-trip out of a family that flies to Tucson once a year to visit the grandparents.
Or maybe they’ll just do a horrible, draconian Basic Economy exactly like UA/AA. Who knows?
Last edited by CalanMan; Jan 26, 2018 at 2:05 am
Jan 26, 2018, 3:50 am
#35
Join Date: Dec 2016
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They talk about segmentation a lot, but that can involve capturing both higher as well as lower segments of the market. Several times they mentioned reconfiguring the VX planes, which means putting Premium Class and a reasonably-pitched First into the Airbuses and actually being able to sell those seats. W to a segment of folks who’re willing to pay $15-$60 more for some extra legroom, and F to both segments of elites who might pay 1.5x for an instant upgrade, as well as some wealthier folks who would pay 2x to just book directly into F. Capturing all of those is as important as whatever they might make by introducing BE. VX only had 12 MCE seats on each plane, and from my experience, they never sold out before they were discounted at check-in. And almost nobody was paying $1800 to fly VX F for 5 hours, especially once the big 3 and JetBlue were selling beds for half that. Alaska would rather have $100-400 of actual money than a huge, massively-pitched recliner with theoretical $1500 markup, but that flies empty.
VX also had bidding for upgrade on their platform which auctioned off the seats at more reasonable prices. I'm sure also corporate booking happens at a discount too. There is no evidence that AS revenue management would actually be able to generate higher revenues off these seats from the competitive markets of SFO/LAX. Outside of SEA/PDX, AS transcon fares really don't do that well.
Here are the transcon fare numbers out of SAN/SJC/LAX in Q3:
BWILAX - 199
DCALAX - 258
BWISAN - 196
EWRSAN - 245
MCOSAN - 187
BOSSAN - 294
EWRSJC - 225
Outside of BOSSAN (which will get mint treatment soon), none of the fare numbers look good. So, I don't see evidence that AS revenue management outside of PNW will do better than what VX generated.
They're obviously DOOMED, because they just boosted their dividend. That is what doomed companies do, right?
Last edited by tphuang; Jan 26, 2018 at 4:00 am
Jan 26, 2018, 6:57 am
#36
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There are no giant warnings on Expedia and other third parties. Ma and Pa Kettle go on Google Flights once a year for their trip, and sometimes get screwed over. And after decades of the legacy carriers screaming "We are better than Spirit!", unseasoned travelers are not ready for the possibility of this happening to them.
I hate the existence of fares from UA and AA that don't allow a roller bag. It's absurd for any carrier to pretend someone going on a trip doesn't "need" more than a backpack (since anything that's an ancillary fee should be for an optional service like a seat assignment). So if AS is reading and they decide to start introducing BE fares, they better copy DL or plenty of their SEA traffic is hosed.
I hate the existence of fares from UA and AA that don't allow a roller bag. It's absurd for any carrier to pretend someone going on a trip doesn't "need" more than a backpack (since anything that's an ancillary fee should be for an optional service like a seat assignment). So if AS is reading and they decide to start introducing BE fares, they better copy DL or plenty of their SEA traffic is hosed.
Bottom line is that adults have to act like adults and no amount of spoon feeding is going to fix that. AS will be responsible for its website if it chooses to offer BE. Hopefully it is a competetive advantage for carriers to offer clear and prominent service distinctions and, over time, people will gravitate to them.
Additionally, over time people will come to better understand the "standard" offering just as they have come to understand that they may have to pay for their first checked bag. A lot of whining when the concept was first introduced. Not so much after a couple of years.
The whole carry-on thing is overstated. There simply is not enough room in the OH's for every passenger to bring onboard a carry-on which just barely meets the maximum size. This means that, if everyone does, some people will have to gate check. Generally-speaking it ought to be those who bought tickets with that understanding and not some poor slob who paid a lot more for his ticket and has to run between connections or chooses not to sit at the gate.
Jan 26, 2018, 6:58 am
#37
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Last year I completed the delta status challenge, and this year I’ve been splitting travel between the two Airlines. One of the advantage for AS is the ability to buy a fare in regular economy at the same price point DL sells in basic economy. If AS adds BE, it gives me less reason to choose them.
It’s unfortunate seeing AS slowly become more like the big 3, but I suppose that is inevitable.
It’s unfortunate seeing AS slowly become more like the big 3, but I suppose that is inevitable.
Jan 26, 2018, 7:27 am
#38
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Jan 26, 2018, 9:14 am
#39
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Jan 26, 2018, 9:37 am
#40
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2. As has a duty to its shareholders to ,maximize net revenue. On the one hand, that would include not doing bad things to customers. On the other hand, it includes selling seats which it otherwise cannot sell.
AS likely is figuring out what the numbers likely prove for DL, AA, and UA, namely that BE does go to the bottom line as a positive and that people who dislike the concept are largely smart enough not to book BE. If that is the case, BE is simply a product which fills customer demand for the cheapest possible seat.
Jan 26, 2018, 10:12 am
#41
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NBC Nightly News had a short investigative feature on BE fares last night. Sounds like Congress is looking at these fares and trying to develop some legislation to increase transparency around them.
To us "experts", it seems like BE fares are quite obvious. To the general public, who doesn't look at DL/AA/UA.com every single day, several times a day, I can imagine it can be difficult to interpret what you are and are not getting and the total cost you can expect to pay compared to a regular coach fare. It doesn't help that DL BE allows a carryon in the OHB, while AA and UA do not.
I think it's also ridiculous that BE airfares have expanded so rapidly into so many markets where there is not LCC competition. BE fares were first introduced/justified to help the major 3 make inroads against the ultra-LCCs, but now they've expanded to such a degree that they basically have translated into a $25-50 fare hike for a reasonable ticket even in some INTL markets.
To us "experts", it seems like BE fares are quite obvious. To the general public, who doesn't look at DL/AA/UA.com every single day, several times a day, I can imagine it can be difficult to interpret what you are and are not getting and the total cost you can expect to pay compared to a regular coach fare. It doesn't help that DL BE allows a carryon in the OHB, while AA and UA do not.
I think it's also ridiculous that BE airfares have expanded so rapidly into so many markets where there is not LCC competition. BE fares were first introduced/justified to help the major 3 make inroads against the ultra-LCCs, but now they've expanded to such a degree that they basically have translated into a $25-50 fare hike for a reasonable ticket even in some INTL markets.
Jan 26, 2018, 12:51 pm
#42
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Congress has considered similar "transperency" legislation for 20+ years for every feature of air travel and has not passed once such piece of legislation. Not one thing beyond a hearing for show in some subcommittee during a long and boring afternoon. And even if it does, that gets to the whole point that people here are not ranting about disclosure or transperency, they are ranting that the fares exist.
Jan 26, 2018, 1:26 pm
#43
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I think Alaska needs to do something. If they match everyone's fares, 99.9% of travelers don't realize the difference between Alaska, Southwest, Spirit, or Delta Basic.
and if Allaska doesn't match these fares, they will lose bookings even if the fare difference is $5, most will book away.
and if Allaska doesn't match these fares, they will lose bookings even if the fare difference is $5, most will book away.
Jan 26, 2018, 1:55 pm
#44
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These terrible BE fares would be justifiable under two conditions, LOWER OR THE SAME base price as the LCC's like NK, F9, and G4, AND the option to add in extras, such as seat assignment, carry-on bag, earn miles etc. However what they did was make the old economy fare the BE fare, and the new regular fare is higher. While I applaud them in the financial sense I oppose them on the moral issue behind this. But at the end of the day they are a business, and they will do what is right for their company as a whole. However I only see this working with the likes of Delta, American, United etc. A dinky little regional airline like AS has no business doing this, as many will book away with them for either the big guys or the ULCC's.
Jan 26, 2018, 2:32 pm
#45
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https://www.npr.org/2017/12/12/56996...ge-fee-at-book
I just don't see them jumping in to tackle basic economy fares which could even be a more complicated issue.