The Airport Lounge Conundrum — Airline Innovation Report

The Skift Airline Innovation Report is our weekly newsletter focused on the business of airline innovation. We will look closely at the technological, financial, and design trends at airlines and airports that are driving the next-generation aviation industry.

We also provide insights on developments in passenger experience, ancillary services, revenue management, loyalty, technology, marketing, airport innovation, the competitive landscape, startups, and changing passenger behavior. I write and curate the newsletter, and we send it on Wednesdays. You can find previous issues of the newsletter here.

As airlines in Europe and the United States cut seat pitch, in-seat television screens and free food on short-haul flights — sometimes even in business class — executives often defend themselves by saying passengers may want more perks but few will pay for them.

But even as cuts continue, many carriers refuse to end lounge access. At these not-so-exclusive clubs, passengers often eat cheese cubes and crackers, sip cheap wine and fight for seating. Yes, most airlines have some nice clubs, usually at hubs, often reserved for long-haul business and first class travelers, but many more lounges are dreary, and uninviting.

Yet it’s remarkable how much passengers want to visit rooms with worn furniture, forlorn buffets, and coffee tables filled with empty plates and cups. In the United States, travelers often pay for memberships, mostly for at least $500 per year, while in Europe and elsewhere, mid-level elite frequent flyers and business class passengers get in free. Some banks also grant lounge memberships as part of a credit card’s annual fee.

Airline executives might prefer it otherwise. Some airlines probably can make lounges money-makers by selling a lot of memberships, opening clubs to passengers from other airlines, using these facilities to entice more travelers to apply for airline-branded credit cards, or joining Priority Pass, a network of more than 1,000 lounges worldwide. Priority Pass pays an airline each time a member enters.

But in the aggregate, it seems unlikely clubs are major revenue producers, since carriers not only must operate their lounges, but also must pay others to accept their passengers where they do not have one.

Still, British Airways has not touched the perk even though it has been on a cost-cutting binge, with short-haul business class passengers sitting in seats with 30-inch pitch, same as Ryanair in coach. British Airways even charges many short-haul business class passengers to choose a seat in advance, and prices start at about 20 pounds ($27.50).

But buy a British Airways Club Europe ticket from London to nearly anywhere in Europe, and you’ll visit a departure lounge for free. You’ll also get access if you’re a mid-level elite frequent flyer on British Airways, or one of its partners, including American Airlines. This is not an insignificant expense for British Airways, or its partners.

A few carriers seek to reduce lounge expenses. SAS recently cut lounge access at some airports, mostly in secondary European cities, because it no longer wanted to pay third-party operators to accept its customers. In the United States, JetBlue Airways does not have lounges, even for travelers flying in its Mint business class. It is a competitor for American, United Airlines and Delta Air Lines, all of which offer club access for flights from New York to Los Angeles and San Francisco.

If they could get away with it, more airlines probably would cut lounge access, at least to some passengers, or at some airports. But passengers seem to demand it, and airlines may fear customers would defect to another airline or alliance if the perk disappeared.

What do you think it is about lounges? Why are they one of the few perks airlines seem reluctant to take away? And why do customers like these clubs so much?

Send me your thoughts via email [[email protected]] or find me on Twitter. I’m @briansumers.

— Brian Sumers, Airline Business Reporter

Stories of the Week

Delta Finds Passengers Paying for Upgrades With Their Own Money Is Big Business: Delta has been upfront about why it upgrades fewer domestic passengers to first class. “Any business where you give the majority of your best product away for free doesn’t work,” Delta CEO Ed Bastian told me in September. Many passengers who once expected upgrades were business travelers flying on an expense account. But when Delta took away some of their upgrades, something unusual happened — customers started buying up with their own money.

Virgin America Is No Longer an Airline in the Government’s Eyes: Virgin America loyalists, especially in San Francisco and Los Angeles, loved the upstart airline, but it never really caught on elsewhere. It lacked the size and scope to compete with major network carriers. Last week, Virgin America lost its operating certificate, and its flights now operate under Alaska’s. Officially, that means Virgin America isn’t an airline anymore. By April, when Alaska merges the two reservations systems, Virgin America will be just about gone.

New York JFK Is Getting a Centurion Lounge From American Express: An AMEX executive told me these clubs are the top travel-related perk for Platinum and Centurion cardholders. And it’s almost certain the lounges help American Express attract and retain cardholders in New York and elsewhere. But this is a massive investment. How much do you think it costs to rent and configure 15,000 square feet in JFK Terminal 4?

U.S. Airlines Cancelled Fewer Flights Than Usual in November: This is not a fluke. Many U.S. airlines are emphasizing completion factor, and that is paying dividends. As with many operational metrics, Delta is far in the lead. But United’s improving, too.

Airbus Casts Doubt on the Future Production of the World’s Largest Jet: For a couple of decades, airlines didn’t seem to know how to best use the Boeing 757. Its engines had too much power for the routes the jets flew, causing the 757 to burn more fuel than similarly sized planes. But then Boeing stopped producing the jet, and airlines figured it out. It’s a perfect airplane for transatlantic routes with thin demand. Will something similar happen with the A380 if Airbus stops making it in a few years? Will the A380 have its moment in the 2030s at slot-controlled airports with limited capacity? Maybe by then more airlines will want gigantic jets.

Troubled Mexican Airline Interjet Grounds Some of Its Aircraft: You probably don’t need to be an aircraft maintenance expert to know Interjet never should have bought the Sukhoi Superjet 100. Sure, the Mexican discounter got a great deal, and maybe on paper it “was the best choice for Interjet given Mexico City’s temperatures, altitudes and the routes they were intended to cover,” as the airline’s CEO told Bloomberg. But no other airline in the Americas flies the Russian-made jet. Even in a best-case scenario, Interjet was going to struggle with maintenance. But now that the jet has proved far less reliable than the airline’s Airbus fleet, the situation is dire.

Those 4-Digit Flight Designations? Their Days May Be Numbered: The Los Angeles Times has a cute story about flight numbers, reporting that many larger airlines are running out of possible numbers. So far, according to the story, airlines don’t have much of a solution, though it notes some carriers use the same flight numbers for out-and-back flights. Here’s one short-term solution: Many airlines avoid unlucky numbers for flights, such as any number starting with 13. Perhaps it’s time to retire that convention.

Coming Up

I’m working on a story about airlines that allow economy class travelers to buy up to a business class-style experience, even while sitting in a seat with 30 or 32 inches of pitch.

Last week, I interviewed Ghislaine Van Branteghem, Air France’s catering product manager for long-haul flights, about her airline’s premium food offering. On many flights, Air France not only gives out the usual free food, but also sells high-end meals, such as a quintessentially French meal with duck foie gras as starter, lamb stew as a main course, camembert as a cheese course, and chocolate Paris-Brest, a French pastry, as dessert. From several U.S. cities, it’s available for $25, or 8,500 frequent flyer miles.

I learned only two to three percent of long-haul passengers buy the special meals, part of Air France’s a la carte menu, and that classic French food often sells best. Van Branteghem said meals are more popular on U.S. routes than on African ones. And while the program produces revenue, for now, she said, it’s more about offering customers a choice.

“The main objective is to increase our customer satisfaction but we also have a margin from the a la carte meal,” she said. “It’s also not a very important margin. What is important is to give the customer the choice and to improve satisfaction. We think if the customer is satisfied they will fly again with us.”

Van Branteghem said free meals will remain on long-haul routes, and selling food is not a test to see if the airline can some day charge for all food on longer routes.

Look for the full story soon.

Flying with a Baby

I’m a newish dad, and last year, I took my now nine-month-old on eight flights, enough to make me something of a baby travel expert. Last week, I shared some of my new knowledge with Conde Nast Traveler for a story called, Everything You Need to Know About Flying with a Baby.

I realize I’m in the minority here, but I don’t understand why parents would hold a baby on their lap for an entire flight. Yes, it’s expensive to buy your kid a seat, but so many aspects about having children are expensive. Sometimes, you need to err on the side of caution, even if the risk of disaster is low. At least that’s my opinion.

Here’s what I say in the piece.

“You wouldn’t hold your baby in your lap in a car, even if you were only going a mile away at ten mph. So why would you hold your baby on an airplane racing on a runway at 150 mph? It makes no sense, and it’s not safe. In severe turbulence, or in a survivable crash, you may not be able to hold onto your baby. There have been some pushes in the past to make car seats required, but there’s never much appetite for it. That’s a shame, because it’s the right thing to do. You’ll have to buy a seat for your child at age two, anyway. You might as well start early.”

What do you think? Do you agree? Or do you think I’m being too harsh, considering most kids do just fine without a car seat?

Send me an email with your thoughts. I’m at [email protected].

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Skift Airline Business Reporter Brian Sumers [[email protected]] curates the Skift Airline Innovation Report. Skift emails the newsletter every Wednesday. Have a story idea? Or a juicy news tip? Want to share a memo? Send me an email or tweet me.

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