Airlines are trying to monetize their best products. Imagine that. More and more, airlines look like a sustainable business. We'll see if it lasts.
Does having high-level elite status with an airline matter anymore?
I’m not sure it does, and I’ve stopped chasing it. Airlines offer lots of goodies to their most loyal members, but many frequent flyers focus on just one perk — upgrades to premium cabins. U.S. airlines are more generous than others, but most full-service carriers have some mechanism to permit loyal flyers to sit up front, using miles or chits.
Or at least they did. Business is booming just about everywhere except South America, and airlines can fill premium cabins with paying passengers. Often, passengers commit to premium travel at purchase, but increasingly, they’re buying up after ticketing, sometimes at a discount, through an airline’s mobile app or website. Last month, I wrote about how Delta Air Lines and United Airlines try to persuade passengers to spend more for a better experience.
This week, I wrote about a third-party technology called PlusGrade, which uses an auction-style system for premium seats. On more than 70 airlines, passengers can place a bid for how much they’re willing to pay for an upgrade. “We want to make sure that as the door closes, every possible dollar has been earned and passengers get a better experience,” said Chris Engle, PlusGrade’s chief commercial officer. Interestingly, some passengers pay more for a premium seat through the auction, as they’re essentially buying it in installments — first a coach ticket, and then later, after the credit card bill is paid, an upgrade.
I used PlusGrade earlier this year for a premium economy upgrade on Scandinavian Airlines, and I was impressed by the experience. I now realize that if I want to sit in a premium cabin, I must pay for it. And that’s OK, because at least I’m not chasing high-level status in the hopes I’ll someday score a “free” upgrade.
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Airlines Find Another Way to Wring Out Extra Revenue: Auctioning Unsold Premium Seats: When PlusGrade started in 2011, it helped airlines unload premium seats at fire-sale prices. Today, airlines do a much better job of selling seats through their own channels, so PlusGrade is more focused on yields. An airline might have just a few seats to sell a few days before departure, and PlusGrade helps the carrier achieve maximum revenue. “We are happy the airline is selling more through traditional channels, so what we are saying is, ‘If there is one or two, let us get you a lot of money,'” Engle said.
Wi-Fi Provider Gogo Is Hurt by American Airlines’ Tough Tactics: As Delta Air Lines has increasingly cozied up to Gogo, its primary Wi-Fi provider, American Airlines has taken a different approach, removing the company’s technology from hundreds of aircraft, and changing the model for how it pays for Gogo’s services. This development has hurt Gogo’s revenues, its CEO admitted last week.
How Wizz Air Plans to Take Advantage of Brexit: Wizzair is betting it will continue to find opportunities in the UK regardless of how Brexit unfolds, writes Patrick Whyte, Skift’s Europe editor. “There might be more turbulence coming and we will make sure that we have a position here in the UK to further expand our business,” the discount airline’s CEO, József Váradi, told investors last week.
Frontier’s Pilots Reach Tentative Deal on New Contract Making a Strike Unlikely: Frontier’s pilots have been shockingly underpaid compared to their major airline counterparts, but it looks like that will change. Their union, the Air Line Pilots Association, said this week it had reached an agreement in principle with the airline. Frontier is the only U.S. airline where pilots are still working under a 2008-era bankruptcy contract.
Airline Weekly Podcast: Third Quarter Struggles, Turnarounds and a Missed Opportunity: As loyal readers know, Skift acquired the aviation newsletter Airline Weekly earlier this year. The Airline Weekly team produces a weekly podcast, and recently it focused on U.S. airline earnings. This story has a roundup of the discussion and a link to the podcast.
Lufthansa Launches a Unit to Help Itself and Others Sell Travel Better: Lufthansa Group has responded to digital disruption by creating a company within a company, Yilu. The group’s low-cost carrier Eurowings has already begun using the subsidiary’s tools for cross-selling taxi rides. Skift Travel Tech Editor Sean O’Neill has the scoop.
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Why Cities Should Build More Bare-Bones Airports to Solve Capacity Crunch: From New York to London to Singapore, airport operators are spending billions of dollars building the most opulent terminals. That work is okay at massive hubs, Bloomberg columnist David Fickling writes, but everywhere else, it’s not necessary. He recommends cities build more airports and worry more about function over form. “Soaring architect-designed roofs, Prada concessions, and day spas are all in their way a symptom of the inefficiencies of our current congested airports,” Fickling writes.
Legal Pot Creates Confusion for Airports and Travelers: By state law, marijuana is legal in some U.S. states, including California, and illegal in others. And of course, it’s still illegal under federal law. That makes things complicated at airports, like Los Angeles International. “We’ve actually seen more of an increase in the checked luggage from people who don’t really understand the California law,” the spokesman for the Los Angeles airport police told Bloomberg. “They go into the dispensaries and they say, ‘Oh, give me five pounds to take home to Texas with me.’” That’s definitely not legal.
Qatar Airways CEO Repeats Threat to Leave Oneworld Airline Alliance: How many times has Akbar Al Baker threatened to leave the alliance? His relations with many members of the alliance — at least ones in which his airline does not have an investment — have deteriorated in the past couple of years. This week, he has been attacking Qantas, as Bloomberg’s Benjamin Katz writes.
Skift Senior Aviation Business Editor 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 him an email or tweet him.
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Photo credit: The Scandinavian carrier SAS is one of more than 70 airlines using PlusGrade. Pictured is its long-haul business class cabin. SAS