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.