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On a recent episode of the Skift podcast, we debated the true cost of cheap flights, why airlines are fighting to capture price-sensitive travelers, and what they’re charging for instead. What are travelers giving up when they opt for the lowest price?
With us in the office was Brian Sumers, Skift’s airline business reporter, and joining us by Skype was editor-in-chief Jason Clampet. We also had clips from interviews Sumers and Clampet did with British Airways CEO Alex Cruz, International Airlines Group CEO Willie Walsh, and Emirates Airline President Tim Clark.
Here are five takeaways from the conversation:
For many customers, discounted airfare is irresistible.
Airlines offer many extras on top of the plane ticket itself — extra legroom, nicer seats — but because most people fly infrequently, and it’s a big expenditure, they’ll give up nearly anything to get that ticket cost down.
“People like things cheap. That’s their first loyalty in almost every case,” said Clampet.
“Consumers want cheap flights. They always have. One of the things that they never really wanted is the bad food that you get on board, those microwavable dinners, and stuff like that. People are just looking for the cheapest way they can get to Europe to start their vacation,” said Sumers.
There’s no such thing as a free lunch.
These impressively low, basic economy fares aren’t charity, nor some kind of customer reward. Flying ultra-low-cost means the airlines get that money from you in different ways, for example charging for food, choosing a seat, or — in limited cases right now — using the overhead bin space.
“I think we’re going to see a day when airlines are actually charging for the overhead bins and more often. Because you have more demand than there is supply in these bins, and the easiest way to make sure that people have bin space when they get on the plane is to charge for it, even if you only charge $10,” said Sumers. “We always joke that one of these airlines is going to eventually charge for the bathroom. I don’t think that’s going to happen.”
Low-cost carriers aren’t immune to the threat of legacy carriers’ low-cost products.
Spirit, Frontier, and other low-cost carriers may feel confident about the popularity of their products, but that doesn’t mean that low-cost options from legacy carriers aren’t gaining traction.
The CEO of Spirit Airlines has said he expects the basic economy strategy at bigger carriers to backfire because passengers will be annoyed at what they’re giving up. Sumers isn’t so sure.
“I think the Spirit CEO is being a little bit overly optimistic,” he said. “These new fares are going to hurt Spirit and Frontier. I think you might get in a situation where two things happen: One, passengers are actually upset with legacy carriers, but at the same time, it’s stealing share away from Spirit and Frontier.”
There’s much hype about cheap transatlantic flights, but almost no one is actually landing that $65 fare.
Recently $65 transatlantic fares on Norwegian Air were making headlines, but that fare in reality is very difficult to land. Most people won’t be able to fly under the precise circumstances that result in such shocking savings.
“If anyone got one of those, they should call the Skift headquarters, because it’s sort of akin to winning the lottery,” said Sumers. “I just took a look recently at some of Norwegian’s routes, and summer, which is a high-demand time, it looked like you’d be paying somewhere between $450 and $650 round trip, which isn’t bad. They’re going to charge you for food, they’re going to charge you for other things. But you know, it’s a competitive industry right now, and you’ve got a lot of airlines that are matching Norwegian’s prices.”
Some customers are willing to be uncomfortable while flying from New York to London, but New York to Beijing is a different story.
Cost may be a leading factor in air travel decision-making, but if the flight is long enough, customers have shown that they’ll pay to avoid discomfort, and ultra-low-cost seats (and their lack of amenities) are indeed uncomfortable.
IAG’s Walsh — whose group includes British Airways, Vueling, and Iberia — said not that long ago, the general thought was that passengers wouldn’t tolerate long-haul flights for more than four hours or so.
“Because customers wouldn’t accept the idea that you had to pay for water, pay for your drink, pay to check in a bag, pay for a meal,” Walsh said. “But Norwegian has clearly demonstrated that, you know, the consumer is happy to do that.”
At Emirates Airline, Clark said the carrier has found the extras that customers really value — and is still considering what else passengers might pay for.
“We have a lot of families and groups traveling. They all want to sit together, and it drives a lot of what people do, and when they do it, and why they do it,” Clark said. “You’ve got people in hen parties, stag parties, golfers, footballers… they really don’t want to be alone… and they’re willing to pay for it.”