Airline Pricing Strategies: Antisocial?

by Dan Robles on 04/11/2010

santa-planeOne of my favorite video program on the web is Dr. V’s (Amy Vanderbilt) Trend POV broadcast live on Friday’s at 2:00 pm EST/11:00 am PST.  In a recent program, Dr. V exposes the trend in commercial airlines toward option based pricing.

The poster child for ancillary fees is none other than Ryan Airlines for going far and beyond the line of duty in treating their passengers like, well, how one would treat a mushroom, I suppose.

We award RyanAir the Self Tending Mushroom Award (or STeMie) for relentlessly innovating new ways to charge passengers so that passengers are charged less”

TrendPOVCover_300x300Savvy RyanAir passengers can choose from an extensive menu of priced options including the following:

  • Check-in online (mandatory)
  • To check in at the Gate (alt mandatory),
  • To pay for your ticket (mandatory),
  • Have priority boarding,
  • Take your infant with you,
  • Check one bag,
  • To check a second bag,
  • To take your infant’s equipment with you,pic
  • Take sports equipment with you,
  • Take a musical instrument with you,
  • Change your flight,
  • Change the name on your ticket,
  • Print another boarding card,
  • Check bags that are more than 15kg,
  • Carry your own checked bags to the plane (mandatory),
  • Eat, drink or use the toilet in-flight (proposed),
  • and many more. “

The best one is being charged for checking in.  Hmmm, that means you are paying them to pay them!” (ed. Yikes!)

Soaring With Eagles, Flying With Fish

Steven Frishling from www.flyingwithfish.com is one of the most respected commercial aviation bloggers and travel strategists in the country.  Dr Vanderbilt interviewed “fish” on her program for his many insights.  He reveals more interesting facts as well as important ways that Social Media can reverse the trend of what he calls “unbundling”.

FWF founder“People shop airline tickets by base price but by the time all of the [mandatory] options are factored in, there is not much of a discount after all”.

Putting the “anti” in social

Another disturbing trend is the transfer of expense to the passenger.  Airlines will often negotiate lower landing fees at a minor airport further from the hub and then the traveler needs to ride a bus for several hours to get to the hub airport.

There are many example is the market where unbundling of fees is quite typical.  We see in happening in the extended warrantee we are offered on all types of appliances.  We see in premium on perceived features such as popular colors or “stainless steel” appliances.  Many companies may be looking to expand the practice.  However, the experience of commercial airlines lends a cautionary tone to those considering ancillary pricing as a profit center.

Predictions for the Future

Steven Frishling predicts that there will be a schism in the industry, some airlines will take on the race to the bottom with ancillary fees and others will realize that every angry customer is an opportunity to migrate to a superior travel experience.

Charging is obnoxious – every hit hurts.  In fact, Expedia makes the majority of their fees off everything except airlines, why can’t airlines learn from this?.

Steven suggests that the opposite of bundling – integrating hotels, taxis, sponsors, etc even using frequent flyer miles – is a the best way to improve the experience of flying. Airlines should provide targeted portals, build sponsored content, attract sponsor revenue, supply hotlinks, etc.  All of these are clever ways to derive revenue without alienating passengers.

All this “cost-saving” of ancillary pricing can quickly become a huge liability as competitors come along with comparable prices and superior service. Social media is proving to be an excellent tool for reaching out to passengers and understanding the needs. This allows them to package features smartly, un-bundle fees in a way that adds value to the experience, not by squandering trust and respect at every opportunity.

{ 18 comments }

Daniel Rose August 26, 2010 at 9:39 pm

Thanks for the article.
Airlines always have a difficult time of it. It’s one of those capital heavy industries where it’s not so easy to plan cashflow.
I think it was Richard Branson who was once asked how to become a millionaire. His response was to start out as a billionaire, then buy an airline.

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Tiago April 13, 2010 at 5:00 pm

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Harley Blada April 12, 2010 at 10:31 am

Damn, awesome website. I actually came across this on Bing, and I am happy I did. I will definately be coming back here more often. Wish I could add to the conversation and bring a bit more to the table, but am just absorbing as much info as I can at the moment.

Thank You

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