Will New Business Class Fares Woo Back Corp Travelers?

It’s business class, but without the champagne. Or a meal. Or most of the other included extras you’d typically associate with this type of booking.

New Japanese low-cost carrier Zipair on Friday is taking to the skies with a new “basic” business class product, essentially a full-flat seat. “The cover of each seat is made with genuine leather, allowing one to relax and enjoy the flight experience, while being equipped with reading lights and charging equipment,” the carrier said in a statement.

Zipair, a subsidiary of Japan Airlines, will initially fly between Tokyo Narita and Incheon International Airport in Seoul, South Korea, using Boeing 787 Dreamliners. These basic business-class seats are priced at $285 and economy at $75. Tokyo-Bangkok flights are also being planned at some point in the future.

It’s not the first airline to unbundle premium fares in this way. In June last year, Emirates began offering H fare — a business-class ticket without perks like lounge access and chauffeur service. It was an idea president Tim Clark had as far back as 2016.

Could this basic business concept appeal to other airlines?

Shopping Around

“Other airlines will move in that direction,” Olivier Benoit, principal and vice president of air, I&A, at Advito told Skift. “Airlines need to be creative to stimulate demand. Ancillaries have proven to be the main margin driver over the past few years.”

He’s not wrong. CarTrawler estimated they made $55.8 billion from ancillaries in 2019, based on financial filings published by 154 airlines.

However, while this concept could generate extra revenue, it might end up confusing both travelers and the company travel managers.

“How can employees compare competitive offers between carriers in a simple way if the one is a bundle and the other an all-inclusive?” Benoit asks. “Also, expect to see some travelers realizing only at the gate or onboard that they have to pay extra for a service they thought was included.”

Meanwhile, basic business class could be difficult to implement. “From the travel buyer or manager perspective it can create complexity, and complexity has a cost,” Benoit said. “You may need to change the travel policy, set up the online booking tool, negotiate the amenity prices in corporate contracts, work out the expense claim process, data tracking for reporting and so on.”

However, it’s likely many corporations will not have the same budgets for travel as they did before coronavirus. Stripping costs to the bare minimum could help some companies justify travel.

“From a buyer perspective, we want to get a great deal on what we want, and nothing more annoys us than paying for something we don’t need,” said GoldSpring Consulting associate Chris Pouney. “In many ways, legacy carriers introducing hand baggage-only fares — which is another way of saying they are charging for baggage — is actually something us buyers were asking for a long time. Why, when 99 percent of my travelers go on a day trip London to Geneva, are we subsidizing someone taking their entire baggage allowance?”

The net result, he added, is that travelers often now pay for bags.

In today’s retailing landscape, the technology is advancing, in particular with new distribution capability. In Asia, Japan Airlines has joined Amadeus’ NDC X program, while Singapore Airlines recently nudged corporate travel agencies towards using the channel when purchasing tickets by bringing in a $12 penalty for bookings made on some global distribution systems.

“NDC absolutely plays a part in achieving it, providing airlines will let buyers be as flexible as they like to be on how and what we unbundle,” Pouney added. “The ability to bundle or unbundle areas of a supplier’s service is very exciting indeed. Rather than reduce prices though, I think any basic business concept might actually just end up masking the fact that prices would otherwise have gone up, which arguably they have with hand baggage only fares.”

Another downside is that airlines that develop new and unique types of business class may get annoyed if travel buyers try and unbundle something which they consider as a core part of their offering or if they consider it a differentiator, he added. “Their concern would be that If we unbundle all those things they consider as a USP, such as food and lounge, it’s easier for us buyers to commoditize them and play the market — although it only works if there is genuine competition on the route.”

In a world where an airline group can declare itself a digital lifestyle company, and when passengers are buying tickets simply to eat on a plane that’s going nowhere, Zipair’s plan shouldn’t really come as a shock to anyone. Now’s a good as time as any to experiment.