Real Airline of Genius ?

It looks like Spirit had a plan to advertise Bud Light on aprons worn by their flight attendants, but the Association of Flight Attendants-CWA (AFA-CWA) have put out a Press Release saying they aren’t happy about it:

"Turning flight attendants into walking billboards is unacceptable," said Deborah Crowley, AFA-CWA Spirit President. "The proposed aprons diminish the primary and federally mandated role of flight attendants as safety professionals and our role as first responders onboard."

The pilots have also risen up in umbrage:

"The pilots join them in demanding that this management stop these campaigns and run this company more like an airline and less like a frat house,” said Capt. Sean Creed

Umm – first of all, FMV has to point out that the correct term is “Fraternity” not “Frat”. That’s demeaning.

Second, FMV has chronicaled Sprits’ willingness to go gutter in their advertisements:

• They have had a “MILF” Fares campaign. No PR by flight attendants about it.
  
• They have had a “We’re proud of our Double-D’s” campaign. No outrage by the pilots.
  
• They have even had “score some strange”! No objection whatsoever.

We're pretty sure there have been other low brow gems, but we quit keeping track. So now the company tries to capitalize on the clientele attracted by such promotion, and the employees are blocking them. "ENOUGH IS ENOUGH – We completely draw the line at selling Bud Light !!"

Well, FMV supports the employees' position, but with a bit different rationale. We just can't get behind Bud Light. Drinkability? We think not. It's the Campari of beers. That leads us to the more important point. Couldn't this A-team marketing department line up a different partner? Never during brainstorming did the whiteboard read, "Beer, Wine, or Spirits brand"? Hello? Spirits on Spirit? That's not just a layup, you gotta dunk that one. Sigh.

Nickels & Dimes Add Up

For anyone not on the ancillary revenue and service fee bandwagon, check out this investor presentation from United Airlines (Dec 2008). Yes, maybe United is not the fiscal role model all airlines should aspire to be, but their nickels and dimes may be adding up to real money. $1.2 Billion in 2009 to be exact. We beeline to Slide 14 for a summary of their ancillary revenue growth:





That's a pretty ambitious target for 2009, given the 2008 data and declining capacity in a global economic downturn. Yet the growth of the previous years suggests it's within reality. Keep in mind, over half of the target comes from good old fashioned service fees tied to a captive audience (e.g. ticket change fee, call center fee, etc.), as shown in this table:





Look at it a different way. UA reported 63 million mainline revenue passengers boarded in 2008, a 7.7% decline from 2007. Yet they were able to grow the ancillary revenue 28%. That's pretty good. And if passengers remain flat in 2009 (optimistic?), and UA meets their ancillary revenue target, they'll collect ~$19 per mainline pb in ancillary revenue. That's approaching $50 per ticket sold. Pretty good stuff.

All in the [Fare] Family

Frontier has launched its new “fare families” – and taking a cue from the recent inauguration festivities – there has been ton of PR and a slew of Rah Rah press about this. The system is very reminiscent to Air Canada’s structure of different bundles of goods for different prices – which is no surprise since Sean Menke (Frontier’s CEO) was a former Air Canada Exec.

If you need a Frontier AirFairs Primer:

Economy Fares: Lowest price, seat assignment 24 hours from departure, bag fees ($15 for first bag, $25 for second bag), Change fees, miles

Classic Fares: $20 higher than Economy, Advance seat assignment, 2 bags free, Direct TV included, lower change fees, 125% miles

Classic Plus: $60+ higher than Economy, Fully refundable, no bag fees, no change fees, free snacks and beverages, 150% miles.

A few notes, observations and comments:

• Frontier notes with obvious pride that almost 40% of travelers have chosen to pay more to the “Classic or Classic Plus” levels over the Economy. However – look at the pricing: Classic is priced only $20 more than Economy, however you get your bags for free, which is a $15-$40 value. As a result – most people with luggage will only be paying $5 for an advanced seat assignment, Direct TV and 25% more miles. The real key here is how many people checking at least 1 bag upgrade?

• Sabre estimated 12 – 18 months to implement this. Wow. It’s of interest to us that Frontier still uses Sabre as their pricing engine, and Datalex as the shopping engine / Internet Booking Engine (IBE).

• It’s no wonder that Sabre recently bought EB2 in order to shore up shopping and IBE capabilities. We’re not sure if EB2 is enough to get Sabre over the hump though – seems like they have a long way to go to get back to being competitive in this space.

In the end – FMV bets that several of the technology companies will rapidly try to extend their reach to avoid just this type of situation. Sabre needs to greatly improve their shopping / IBE offerings in connection with their PSS / host offerings. It’s a pretty glaring weakness in the online channel that is so important.

The Southwest Effect

You've probably heard of The Southwest Effect. Of course you have, it's got a Wikipedia page. This is when a certain carrier enters a market and miraculously brings low fares to the previously persecuted denizens of the region. Not unlike a Robin Hood for air passengers.

We always kind of figured there was a little bit of bravado in such claims. Consider it a touch of marketing for the good ole boys to discuss at Rotary meetings in Podunk, USA. No longer. A colleague was buying flights to Minneapolis (MSP) from Chicago this week, a day tripper, business meeting. It resulted in a severe pain in the wallet, and he came to FMV for help.

As it turns out, help is on the way. Do yourself a favor, and spot check CHI-MSP fares, using the distribution channel of your choice, for a day-trip in February. Then lather, rinse, and repeat in March. Chart it all up, and you'll probably find something like this:



Look at that. You can go ahead and guess the general date that the market welcomes a new entrant. Or maybe the winter tourism business drops off in March or something. Draw your own conclusion, but Minneapolis probably hasn't been this happy since Garrison Keiller moved to Lake Woebegon. And now we're believers.

Now Boarding......

FMV is not sure what's going on here - but we flew United last night and it looks like they had the "First Day of the New Program Jitters"

The gate agents were all over the place and therefore they thought the new program allowed Premier Exec AND Premier members as part of Boarding Area 0.5. Question: Who else was left? Nobody. The scene was such that Boarding Area 0.5 was simply the same as previous Boarding Area 1.

We're told that other flights did it correctly, and only Premier Execs were part of the 0.5 - but we also had this thought. By making the Premier Executive benefit so public - you also make the Premier benefits less valuable since you took away something they previously had....

Boarding Zone 0.5 ??

FMV recently recieved the following email from United:

Dear FMV: Beginning November 12, our Premier Executive members and Star Alliance Gold guests will board before Seating Area 1 customers through the Economy Lane.

The new boarding order will be as follows: Global Services, 1K and customers sitting in United First will continue to board first through the Red Carpet Lane, followed by our United Business customers. Our Premier Executive and Star Alliance Gold members will then be invited to board.

After all of our most-valued guests are on board and getting settled, the regular boarding process of seating areas 1 through 4 will begin.

Previously, there wasn't a ton of obvious difference between Premier Execs (50,000 miles flown) and "regular" Premier (25,000 miles) members. Yes, you had priority for waitlists and maybe upgrades, you could book exit row seats, and you had the nebulous Star Gold benefits - but it wasn't very obvious. Especially for international travellers. On the contrary, Seating Area 0.5 changes this and makes a very public benefit.

Most airlines are pretty blatant that their elite fliers matter more than the causal flier. On one hand, it causes some bitterness, on the other hand FMV is Premier Exec so YAY !!

Fed Ex Airlines

WAAYYY back in May, 2007 - FMV had this thought:

FMV considers [the idea of] carriers partnering with the baggage shippers to provide more customer options and deflect complaints about baggage fees.

Well - it's come true courtesy of United, who introduces their "Door-to-Door Baggage" Program:

Stop lugging your luggage around. Instead, send it ahead with Door-to-Door Baggage. Purchase this service at united.com, and FedEx will pick up your baggage from your home or office and ship it directly to your destination. Or if you prefer, you can drop off your baggage at a FedEx Office location or any other FedEx authorized shipping center.

The unique feature about this program is that United has tied FedEx into their passengers' itineraries. Once you sign in to your United.com account and press the "Door to Door Baggage" link - the site automatically starts the FedEx process using the dates and cities of your itinerary.

The kicker is the boastful tagline:

United is the first airline to save you time and money with this simple and convenient service.

Save you money?!! How much do they charge for this?? Starting at $149 !! (vs. $15 for a first bag fee??). Hey, thanks for the money savings United !

Hence, this program isn't really about cash savings. It's about time savings. This is for the guy that kind of wanted to send his golf clubs ahead to avoid the hassle of checked bags. He also didn't trust the airine not to lose his clubs. The same logic could hold for business people who don't want to shlep business materials and simply say "eh, I'll just ship it and expense it".

However, the real winner here is FedEx, who picks up some highly qualified leads over its competitors. If UA can skim some of that value, and spin it as a positive for their customers, good for them. It's time to fly.

Poke in the Eye (4 Travel)

We were at the Eye 4 Travel North American Conference – that now combines 3 conferences into one: Distribution / Ancillary Revenue / Revenue Management. Man has this conference really taken a hit. Fairly brutal in terms of content (weak), speakers (boring) and attendance (low), and there is only ONE thing that saves it from being a complete waste:

VEGAS BABY !!

By our definition – any trip to Vegas is time well spent. And since the craps tables were kind to us this year, we’d probably categorize this as a great trip overall – even if the conference was pretty much a waste.

Basically – the morning has only two items of note, both from Frontier Airlines:

Jim Young – VP Distribution had some actual numbers regarding:

1) Travel insurance. Finally !! It looks like only 0.5% of travelers buy insurance if it outside the booking path, and about 5% if the option to purchase travel insurance in within the booking path.

Finally – some real hard numbers that make sense. 1 in 20 buy insurance – those are numbers we can believe in.

2) Also – Frontier says that 50% of travellers check in a first bag, and 5% check in a second bag (which is down from 11% since they instituted a fee).

Young was asked, if oil continues to go down – will the baggage fees stay? While noting that carriers always have to keep an eye on competition, he believes fees are here to stay now that they are introduced to the market, are big money for airlines, and seem to be accepted as a cost of doing travelling now. Can't beat honesty ! We concur. No one pulls a legit revenue stream (except maybe Blockbuster late fees).

CWT and UA Make Nice Nice

This is mostly to close up an ealier post and let everyone know that CWT and United has once again agreed to be friends. From the Travel Weekly (which is updated daily):

"Carlson Wagonlit Travel and United Airlines have come to terms on a preferred-supplier agreement...CWT spokeswoman Shannon Coughlin said no further comments or deails would be released...."


Sheesh - they made their spats so public, but then take their make up private. How's a blog supposed to make a living??

Afraid of Travelling

FMV gets really irked when companies market fear in order to sell their products. Travel insurance seems to do this – which may explain some of its new-found popularity. Well, as we’ve said – we’re constantly told it’s popular even though we don’t know anone that really buys it reguarly.

Eye 4 Travel (yes, we know it’s a PR wire) had this bit of advertising astroturf (it appears to be a real grass roots story, but it’s fake once you really examine it) that had the shocking, just shocking headline:

"[R]esearch has indicated that one in four Brits (24 percent) still plan to go on holiday this year without travel insurance.

Chris Rolland, Head [of] American Express Insurance Services, said, "As the cost of living rises and there is less money left over at the end of each month, our research shows that one in four Brits are struggling to meet the cost of holiday insurance. If it is a case of people cutting back on travel insurance in order to afford their holidays then perhaps they should think twice before booking. Should something happen, the current economic market means that the last thing Brits need now is an unexpected bill."


A few notes:

1) “Head” is a sucky title for Mr. Rolland

2) This “article” basically says that 76% of Briton’s buy travel insurance on a regular basis. Can that be?

3) We can’t seriously believe that American Express is saying “if you can’t buy the travel insurance, you shouldn’t really be travelling…” Way to advertise fear Amex !!

Interestingly - the article goes on to mention that the "research" was performed by a group called Yougov. Well, we did some digging and found this story:

"A May [2007] survey for Norwich Union, conducted by YouGov, found that a quarter of all British travellers go without insurance. The study also found that while travellers believe that lost baggage is the main reason why they might need to make a claim, in fact medical emergency and cancellation are far bigger risks. And those can be a lot more costly than a missing suitcase."

Hmmmm - Same study performed a year earlier with same results... Great work if you can get it.