This is a little off the usual Fares material, but it highlights a risk of onboard sales, so here we go:
The Chicago Tribune reports that during October, Delta Airlines is offering passengers pink lemonade for $2, with proceeds going toward breast cancer research. Great call. The problem is, some enterprising onboard staff started offering "Pink Lady Cocktails" (vodka with the lemonade) for only $3 additional. Health professionals in the know alerted Delta that alcohol consumption in fact INCREASES breast cancer risk.
Doh!
Delta tells the Tribune that the clever product bundling will stop. Is that the end of the story? Maybe.
Who out there thinks that Delta has really strict controls on the sale of lemonade and collection of donations? Closer to Fort Knox or the take-a-penny tray at 7-11? In fact, who would wager that if a passenger opted for alcoholic lemonade, the $5 went to exclusively to Delta to cover the vodka (which probably is counted like gold bricks)? That leaves nothing for the charity!
We also know that flight crews HATE collecting this type of money since they have to sign for it and are responsible for any shortfalls. Delicate balancing act for airline exec's to keep in mind as they continue to expand onboard sales - - especially for non-consumables like video player rental...
Tuesday, October 30, 2007
Thursday, October 25, 2007
Actung Baby !!
Hello from CASMA in the Ritz-Carlton Berlin! We’re at the Fall session of CASMA, which basically means “not in North America”. The theme this year is “Breaking Down Walls” – which kind of makes us cringe a bit. We think it must be tough for an entire city to be associated with a wall that was TAKEN DOWN like 20 years ago. At least some of the Chinese one is still there!
Anyways – your intrepid FMV bloggers are on the scene and here are some notes from day one:
- The buzz-word of the conference is “Ancillary Revenue” and it seems that everyone is trying to figure out extra revenue streams, and trying to copy the Air Canada model- either by creating a family of fares, or charging for extras. We’re talking cars, hotels, baggage, insurance, and others. And YES - someone did crack a "charging for the bathroom joke" - that seems to never get old.
- The best new revenue ideas we heard was the selling of airline gift cards on board, the ability to pay a fee to reserve an empty seat next to you (if available), and taking a portion of currency exchange. For example, some airlines let you pay in US Dollars or Euros – and a bank facilitates that change. Why not use a 3rd party and split the commission fee made on that transaction?
- There was an interesting point that Ryanair may actually be the best airline in world at delivering consistent customer service!! Yes, that sounds totally wrong, until you also remember that they are very clear to the customer that they only do two things: They get you there on time, and they get you there for rock bottom prices. Ryanair consistently has the best on-time metrics of any airline in the world.
- A few airlines like Ryanair and AerLingus are set to get their costs of distribution to turn NEGATIVE. Yes, you read that right – this is set to be a revenue opportunity for some since they already recoup the costs of credit cards and certain channels by charging extra. It was reported that a GDS asked the #2 at Ryanair at a prior conference what it would take to get Ryanair to list in the GDS and the response was “not until the GDS pays us 5 Euro for each ticket”.
- Finally – we think the tide is turning on alternative forms of payment. It looks like Paypal is finally gaining traction in the Airline market (with US Air, Southwest, Northwest, and Midwest) and it looks like other forms of Direct Connect payments are being explored. All this sets the stage for a big war on Credit Card fees – if you think the GDS battles were bad a few years ago – you haven’t seen anything in the upcoming credit card battles !!
Ok – we’re about to go out and check out Check-Point Charlie, and hope there is more to the city than a defunct wall...
Sunday, October 21, 2007
We use miles for magazine subscriptions
Another article in The Wall Street Journal to fuel passengers' frustrations with frequent flyer plans ("Mileage Plans Add to Flier Ire", 10/17/2007). There are some nice factoids in there to illustrate just how pervasive, yet useless, plans have become (e.g., Northwest Airlines has 510 partners for WorldPerks, including 41 new partners this year).
The best gem comes from American Airlines. To support their argument that reward seat availability is NOT declining, a spokesman notes that frequent flyer travellers actually increased from 2005 to 2006, from 7.2% of passengers boarded to 7.5% of passengers boarded.
That sounds impressive, but it's actually misleading. Especially if you take a look at two other facts:
1) If you look in the American Airlines' 2006 Annual Report - it tells you that the number of award redemptions was actually FLAT for the period at 2.6 million [tickets].
2) During the same period, AA's "Passenger Boarded" (segments) volume increased 0.1% (per Airline Business Magazine statistics).
All this tells you is that the Frequent Flier Passenger-Boardeed has increased - but NOT the number of actual tickets. This suggests that frequent flyer availability is tighter, and these fliers are having a tougher time booking direct fligts. But kudos to American for representing the numbers to their favor.
OK - Extra credit for Airline Numbers Nerds follows. AA's PB's in 2006 were reported to be 98.139 million. 7.5% of that means 7.360 million PB's were associated with 2.6 million reward tickets. This yields 2.83 PB's per reward ticket, which is a bit higher than a common industry assumption of 2.5 PB's / Ticket.
FMV has learned long ago that you have to go into the numbers to get the real story - Any time you need a peek behind the WSJ's numbers, you know where to find us.
The best gem comes from American Airlines. To support their argument that reward seat availability is NOT declining, a spokesman notes that frequent flyer travellers actually increased from 2005 to 2006, from 7.2% of passengers boarded to 7.5% of passengers boarded.
That sounds impressive, but it's actually misleading. Especially if you take a look at two other facts:
1) If you look in the American Airlines' 2006 Annual Report - it tells you that the number of award redemptions was actually FLAT for the period at 2.6 million [tickets].
2) During the same period, AA's "Passenger Boarded" (segments) volume increased 0.1% (per Airline Business Magazine statistics).
All this tells you is that the Frequent Flier Passenger-Boardeed has increased - but NOT the number of actual tickets. This suggests that frequent flyer availability is tighter, and these fliers are having a tougher time booking direct fligts. But kudos to American for representing the numbers to their favor.
OK - Extra credit for Airline Numbers Nerds follows. AA's PB's in 2006 were reported to be 98.139 million. 7.5% of that means 7.360 million PB's were associated with 2.6 million reward tickets. This yields 2.83 PB's per reward ticket, which is a bit higher than a common industry assumption of 2.5 PB's / Ticket.
FMV has learned long ago that you have to go into the numbers to get the real story - Any time you need a peek behind the WSJ's numbers, you know where to find us.
Wednesday, October 17, 2007
Popcorn, Candy, and a "Big Front Seat"
Yesterday's Wall Street Journal Middle Seat column by Scott McCarthy had a tidy summary of carriers' strategies to reduce fares by charging extra for various services. You know, checked baggage fees, fees for more legroom, etc.
There's an analogy in there attributed to the CEO of Spirit Airlines B. Ben Baldanza, who notes that such fees are NOT "Nickel and Diming" as some consumers claim, but rather on par with movie theatres that sell you a ticket and then gouge you at the concession stand.
As Tyler Durden once asked, "How's that working out for you? Being clever?".
Interestingly, Baldanza tells us.
Per the article, Spirit's average one-way fare is $100 yet the carrier collects another $15 per passenger via "Non Nickel and Diming" We must say, 15% seems like a pretty good premium. However, note per our post below that Continental Airlines is collecting at least $125 per one-way (based on $250 per round trip) on comparable leisure sales vs. Spirit's $115.
Whoa, so Continental is doing 8%+ better on revenue than Spirit using good old fashioned airline gimmicks like free warm soda, a strong network, and a loyalty plan.
Baldanza says, "you either need to compete on price or compete on product. You can't do both." However, we wonder if Spirit is really saving enough by checking a few less bags to compete with low fares. How much does it cost Spirit to become a flying minimart selling newspapers, magazines, and aspirin?
Note to Spirit passengers - sneak some Junior Mints onboard in your baggage. It works at the movie theatre, doesn't it?
There's an analogy in there attributed to the CEO of Spirit Airlines B. Ben Baldanza, who notes that such fees are NOT "Nickel and Diming" as some consumers claim, but rather on par with movie theatres that sell you a ticket and then gouge you at the concession stand.
As Tyler Durden once asked, "How's that working out for you? Being clever?".
Interestingly, Baldanza tells us.
Per the article, Spirit's average one-way fare is $100 yet the carrier collects another $15 per passenger via "Non Nickel and Diming" We must say, 15% seems like a pretty good premium. However, note per our post below that Continental Airlines is collecting at least $125 per one-way (based on $250 per round trip) on comparable leisure sales vs. Spirit's $115.
Whoa, so Continental is doing 8%+ better on revenue than Spirit using good old fashioned airline gimmicks like free warm soda, a strong network, and a loyalty plan.
Baldanza says, "you either need to compete on price or compete on product. You can't do both." However, we wonder if Spirit is really saving enough by checking a few less bags to compete with low fares. How much does it cost Spirit to become a flying minimart selling newspapers, magazines, and aspirin?
Note to Spirit passengers - sneak some Junior Mints onboard in your baggage. It works at the movie theatre, doesn't it?
Tuesday, October 16, 2007
Eye for Travel - Tuff Second Day
Uggg. Late post about the 2nd day of the Eye for Travel Conference.
You would have thought that organizers of conferences in Vegas would understand by now that the second day is just pure torture. You’ve already spent two hard nights in Vegas, and truthfully, you're really just trying to figure out which sessions you can skip to get an early flight home. It shows in the attendance as well – we bet the attendance is cut by half from day one.
But we're good troopers and are staying. It's all good since FMV actually feels vindicated in two ways:
First – We feel pretty good about our craps play the last two nights. We rode some hot rollers when they couldn’t lose - and then immediately shifted to the “Don’t Pass” betting line when the tables turned cold. The result: our biggest winning night in Vegas in a long while.
Second – We finally got some data on Meta-Searchers to bust the myth that Scrapers serve to “commoditize” airfares. Chris Degroot of American Airlines stated that the top players that they work with (Sidestep, Kayak, Mobissimo, etc.) all show higher airfare yields than their top OTA’s. In addition, they are pretty happy with the conversion rates of referrals from Meta's that sign up for the AAdvantage program.
In fact – Degroot has the money quote of the conference “Currently, AA is more aligned with the Meta’s than with the OTA’s”.
Wow. Almost makes the 2nd day of the conference worth attending…..
You would have thought that organizers of conferences in Vegas would understand by now that the second day is just pure torture. You’ve already spent two hard nights in Vegas, and truthfully, you're really just trying to figure out which sessions you can skip to get an early flight home. It shows in the attendance as well – we bet the attendance is cut by half from day one.
But we're good troopers and are staying. It's all good since FMV actually feels vindicated in two ways:
First – We feel pretty good about our craps play the last two nights. We rode some hot rollers when they couldn’t lose - and then immediately shifted to the “Don’t Pass” betting line when the tables turned cold. The result: our biggest winning night in Vegas in a long while.
Second – We finally got some data on Meta-Searchers to bust the myth that Scrapers serve to “commoditize” airfares. Chris Degroot of American Airlines stated that the top players that they work with (Sidestep, Kayak, Mobissimo, etc.) all show higher airfare yields than their top OTA’s. In addition, they are pretty happy with the conversion rates of referrals from Meta's that sign up for the AAdvantage program.
In fact – Degroot has the money quote of the conference “Currently, AA is more aligned with the Meta’s than with the OTA’s”.
Wow. Almost makes the 2nd day of the conference worth attending…..
Wednesday, October 10, 2007
FMV is back in Vegas Baby !!
We’re at the Eye 4 Travel conference this week. Generally we dread these conferences – but this one is in Vegas so it’s all good. You may not have noticed – but we love Vegas.
Eye 4 Travel is boasting that they have like 800 people, but they are totally cheating because they are combining three pretty unrelated conferences (distribution, revenue management, and CRM) to get these numbers. We think we have to face the fact that E4T is really stretching their limits of being relevant…
There is an interesting dynamic happening here this year. At conferences, there is always a main villain (GNE’s, Metasites, etc), and this year it’s the Online Travel Agents. FMV loves that – we’re totally on that bandwagon!
John Slater of Continental took the first speaking position and simply told the airline point of view when it comes to distribution. Slater has a great way of telling you bad news in such a reasonable way that you find yourself wanting to apologize. You kinda feel like it’s your dad explaining why you are grounded. Anyways, we think he had 4 interesting points.
1) Continental.com accounts for 67% of online revenue while OTA’s account for 33%. This is a pretty good penetration of the large supplier sites and we wonder if this is their plateau.
2) OTA’s average fares are around $250 – we’re talking pretty cheap fares here folks. Slater was pretty blunt that they don’t really need much help in selling these fares to Orlando.
3) International issues are next on the reduction of distribution costs war. While the last round centered on North America – it didn’t address the overseas markets – where costs remain pretty high.
4) Interestingly – Slater mentioned that OTA’s buying their brand name for searches on Google is really starting to chap their hide. They consider this poaching and follows American airlines actually suing Google for the same thing. So much for “Do No Evil” huh?
OK – Off to the Craps tables – man we love Vegas !
Eye 4 Travel is boasting that they have like 800 people, but they are totally cheating because they are combining three pretty unrelated conferences (distribution, revenue management, and CRM) to get these numbers. We think we have to face the fact that E4T is really stretching their limits of being relevant…
There is an interesting dynamic happening here this year. At conferences, there is always a main villain (GNE’s, Metasites, etc), and this year it’s the Online Travel Agents. FMV loves that – we’re totally on that bandwagon!
John Slater of Continental took the first speaking position and simply told the airline point of view when it comes to distribution. Slater has a great way of telling you bad news in such a reasonable way that you find yourself wanting to apologize. You kinda feel like it’s your dad explaining why you are grounded. Anyways, we think he had 4 interesting points.
1) Continental.com accounts for 67% of online revenue while OTA’s account for 33%. This is a pretty good penetration of the large supplier sites and we wonder if this is their plateau.
2) OTA’s average fares are around $250 – we’re talking pretty cheap fares here folks. Slater was pretty blunt that they don’t really need much help in selling these fares to Orlando.
3) International issues are next on the reduction of distribution costs war. While the last round centered on North America – it didn’t address the overseas markets – where costs remain pretty high.
4) Interestingly – Slater mentioned that OTA’s buying their brand name for searches on Google is really starting to chap their hide. They consider this poaching and follows American airlines actually suing Google for the same thing. So much for “Do No Evil” huh?
OK – Off to the Craps tables – man we love Vegas !
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