NoWindowSeat

I wonder how much AY gets extra cash for selling seat reservations, for exmple? With Y+ I’d imagine they make ok money but that’s a bit different, it also has a cost to AY (more space than normal Y).

What I try to understand is how much AY gets extra revenue from the customers who just buy the cheapest ticket and don’t really care about the rest. They buy the booze onboard for sure but the rest, no idea? (Bags, seats, meals, lounges, priority security...what else they sell..?)

FFlash

Hearhear. This is where they fail I can out my head on that. They think they are smart but we heavyusera will be always smarter and if I was in their shoes I could do much better strategies for them, but I prefer to enjoy the berries on this side

WilcoRoger

Don't be sure about that - tax free is cheaper.

on22cz

I've been trying to avoid commenting until changes are confirmed. The discussion is interesting, though, so I'll put few lines in - inspired by previous comments.

1. In the Capital Markets Day link, one of the first notes colours AY as a modern & premium airline with focus on value delivered to a customer. While I could find signs of a premium carrier (non-Schengen lounges, onboard J drinks, taste of meals in general, customer service), those are far from what would be sufficient - seat quality, meal presentation, service to elite customers, onboard experience / service standards. Their path is modern & cheap. Even the modern part is questionable as the whole digital focus comes out in a form of an Error.

2. Going cheap is a slippery path. In that sense, J Light is a step to do. But as discussed, loyalty is being put at stake. Personally, I rarely need more than 1 luggage (if any), and if I had no status, I'd see paid seat selection as compatible with cheap J product. However, cutting earnings may take away one of the key added values over looking at QR, EY, *A.

3. I still see J Light as feasible if they would finally step up the Lumo game and offer status based flexibility. Wave change restrictions, and it puts e.g. the flight time benefit into a different picture. Another thing could be Y --> W gate upgrades (IIRC, NH used to offer that to elites). It means some loyalty to get up the ladder, so the better the reward waiting there is, the more worth it is to climb. And equally, the poorer the reward is, the smarter it is to work on a network of options after hitting Platsku levels (*G, ST E+ etc.). It's much easier to book an alternative if the basic set of perks (priority, lounge, sometimes baggage) is available.

4. For someone who also sees this as a hobby, the new HON Circle qualification criteria put AY loyalty at risk. Obviously, there are status and redemption points of view. I don't like M&M, but may just enjoy FRA First Terminal, especially if AY motivates me enough to do so. I highly appreciate vast majority of AY's CS agents - they are just too tight-handed. Cabin service has gone downhill in my eyes, but that may again be a result of poor execution of the wanna-be-premium picture of AY. They are still very good, but if management lets them down, there is very little motivation to stay.

5. LCCs have been discussed here, and while they don't have a loyalty program as such, they offer paid memberships (WizzAir, easyJet). Especially with the easyJet's one, I believe it drives some loyalty in. I have considered that myself for European travel.

ff_flyer

Ancillary sales last year was 176M €, which is 5,7% of total turnover so it has substantial contribution to sales as many have stated here. What we do not know is how much of this is sales of AY+ plus points but I would imagine it is a minor factor here.
OTOH, divide that by 14.6M passengers carried last year we get 12€ per passenger where IATA forecasted an average ancillary revenus of 24USD per passenger for 2019.
AY likely trying to follow suite here so better try to adjust to these since they are becoming a norm for all airlines.

Ed Size

I m ready to pay my extra € for the LUMO status - and book a lot of very stripped down cheap Y tickets to LHR - asking for upgrades of course

Ed Size

I have no idea who is smarter in the end, but I know that I will get the most for my hard earned Euros, and I m pretty flexible with that. When M&M slashed the earnings on P & Z I stopped flying with them (after years of SEN), since then only flown award tickets on LH Group - now M&M seems to be interesting again - in 2020 - and AY is going downhill - I can see me in that OS/LX/LH planes (with the hope of upgrades to F are getting cleared).

But without detailed inside knowledge we will never know if they moving the right or wrong way - but I ll take care that I gonna move the right way.

Trav1970

An example data point from what the corporate travel system "encourages" me to do. I needed to book a business class return to a north American destination departing tomorrow. As my actual destination this time is not well served by OneWorld, I am doing split ticketing with the long haul part on one ticket, and a short feeder flight at the other end on another ticket. Therefore I have some flexibility on what the long haul destination is.

Searching for AY availability on almost any destination, D and I inventories from AY are closed. Only J and in some cases C inventory available. Somehow I manage to stumble on an all-AY-coded itinerary which is almost reasonably priced through one long haul destination. As I start booking that, the system forces me to take an AA-coded outbound flight instead, as it is over hundred euros cheaper. I managed to keep the connecting flight HEL-LHR in AY inventory, and also the return legs. Instead of netting around 50k AY points with this I will end up netting around 30k AY points and some 10k AA points. As I have not yet exhausted my non-AY point quota for this year, this is not terrible from the perspective of renewing Lumo but also not ideal.

If I was not doing split ticketing but just flying to a destination which is served well by OW (say, SFO, LAX, etc.), my options would have been far more limited. I would have ended up with either a BA or AA inventory ticket.

By introducing a "J-minus" ticket with reduced earnings, AY would make this hobby much more challenging. In this case, the impact might have been that instead of an outbound AA segment I might have ended with an outbound AY segment with reduced earnings. The benefit of that would have been washed away by the return segment most likely falling into the J-minus bucket, as inventory classes are more wide open for a later day.

ffay005

My impression is that a surprisingly large number of perus-Penttis pay for seat selection. On longer routes, like LPA or AGP, it's not easy to get an emergency exit row seat if you book late. And families pay for their seats because they can't stand the thought of being separated from each other for a few hours.

ff_flyer

And just remember that points expiry is currently 18 months and thousands of perus-Pena have a stash of points to burn. So why not use them for ancillary seats on this year's LPA winter break vacation.

intuition

While a substantial number, it clearly is not meeting expectations to compensate for price pressure in the industry.
ie it is not even growing faster than passenger revenue in total.

Previously, Finnair has said a strategic goal was to double the ancillary revenue over a 3 year period. From the 125,5 MEUR in 2016, ancillary is supposed to hit 250MEUR during 2020. So they need a whopping 42% growth this year to make that goal. With that knowledge, we can look with new eyes at the panic to launch a site that is really bad at selling ticket but pushes ancillary products, the move to cut off most of the OTAs to force sales through their own platforms and to get new ticket types out that paves the way for ancillary rev.



Also, the report says
and I take it as
a) sale of AY+ points are not considered ancillary (is not a ticket related service nor goods onboard)
b) Advance seat is the biggest earner

Ed Size

As advance seat reservation fees for business class a kind of common in the industry, we will likely see them on AY in the future. But since all airlines asking for that fee waiving it for the top tier members nothing to worry about on FT.

WilcoRoger

Actually I thought only BA does that (charge for seat selection in C) Even on Scoot (grrr) it’s free on Scootbiz tix.

Ed Size

OS and LX asking for fees if you want to take the single seats - and LH already talks about fees when introducing their "new" J class.

And the fees are pretty hefty, itīs between 149€ and 209€ for a leg (donīt think that many gonna pay this)

Trav1970

It is probably paid by mr. and mrs honeymooners or other pax who only fly J once as a group. Other than being able to demonstrate a ”valuable” benefit for the tier member, I doubt it will do much of anything.