Fast Company

Technology: The Upside of À La Carte Air Travel

The aviation market is under tremendous cost pressure, with not only high fuel prices but a softening economy impacting air travel and causing carriers to slash capacity. And these factors are pushing carriers to become quite dynamic in their day-to-day operations.

Price sensitivity is one of the airlines' key concerns. The secret to an airline's success is being able to satisfy customer demand while meeting operational costs. Carriers are diversifying how they derive their income, leading some down the path of charging for baggage, seat assignment, or other formerly "free" options. What we are really seeing is the push for ancillary revenue being born out of economic necessity.

But the à la carte model in air travel, if approached strategically, ideally places the customer at the heart of an airline's business. The consumer argument in favor of à la carte is that it really represents value-added service. Is it nickel-and-diming when you are exercising choice and paying only for services that you want above the base fare price?

In fact, if customers have been paying consistently for a service — like an airfare that includes free baggage check-in — and then suddenly airlines start charging for baggage check-in without making adjustments elsewhere to the base fare, then it might look like nickel-and-diming. But as carriers start to think more long-term about ancillary revenue, they will begin to better understand their entire product offering. By "unbundling" everything that they used to charge for in the price of a ticket, they might look at adjusting the base fare downward. Then they can price various options individually and thereby ask the customer, "What do you value? What are you willing to pay for? What is and isn't important to you?"

A good example is airline meals. In the past, consumers used to expect and get meals on every flight. But what was the quality like? Fair or not, airline food has been the butt of many jokes over the years. Today what we see is that the airlines have identified that the consumer didn't value that meal service, yet it represented a significant cost to the carrier.

So now carriers have an opportunity to replace that, perhaps with a better brand or selection, so that maybe the customer is willing to pay a $7 premium to have a good meal. And that strategy goes a long way toward enhancing the brand value and brand image of the airline.

And also leaves everyone full and happy.

Airline Futurist • Miami • www.us.amadeus.com

 

Add New Comment

3 Comments

  • Vincent Cheng

    I would like this to happen. If the online travel sites like Expedia can offer a menu to select what we want while doing the booking and can recalculate the ticket price just like I configure my apple notebook in apple's shop, perfect.

  • Allen Laudenslager

    If the airlines had reduced the cost of a ticket by the cost of a meal not served, your premise would have been valid. They didn’t do that, they cut the meal but kept the price the same. Holding the price for a ticket then adding a cost that used to included in the regular ticket price is a way of trying to hide a price increase.

    No body would have objected to a ticket increase of $15. We might not have liked it but the average consumer understands that prices do need to go up when costs go up. It’s the attempt by the airlines to hide a price increase by pretending that it’s a charge for some “extra” service. The airline is now getting $15 more for the same service and quality.