Leaving Revenue In The Air

by Jay Deragon on 09/26/2011

When commercial airlines do not optimize seat sales they loose money. Historically airlines have looked for “lanes” that have high demand thus insuring increased sales of seat capacity. Now they are using social media to fill seats.

Some airlines say that social-media outlets, such as Twitter and Facebook, are beginning to disrupt the traditional sales cycle. Some airlines are sending sales out directly to customers at all hours, making pricing far less predictable each day.

Social-media sales of  airline seats has just begun and it will change the way airlines have traditionally sold seats. After all empty seats represent leaving revenue in the air.

What About Private Jet Charters?

Private jet charter operators seek buyers who will pay for the entire plane regardless of how many seats are full. Those who charter jets pay the round trip cost of a jet whether they use it round trip or not.  The process creates what is known as “empty legs”. Empty legs are usually one way trips flying empty and yet already paid for by somebody.  Most Private operators try and sell the empty leg at full charter prices and thus few ever sell an empty leg.  Empty legs represent seats unused leaving revenue in the air.

A recent New York Times Article titled “Fly a Private Jet at Public Prices” states “The dirty little secret of the industry is, about a third of our flights are empty,” said Alex Wilcox, chief executive of JetSuite, based in Southern California, which recently began posting last-minute $499 deals on Facebook for empty legs on the company’s four-passenger Embraer Phenom aircraft. “Say a Gulfstream pulls into San Francisco and is going back to Vegas empty,” he said. “A few years ago, if you were to say, ‘if I give you $500 will you take me and my family?’ you would get laughed at.” But the recession changed such attitudes, Mr. Wilcox said. Now, he said, more companies are saying, “Sure, it’ll help pay for the gas.”

Revenue Is Revenue to Some

Allen Howell, CEO of Corporate Fight Management, looks at empty legs as an opportunity to expand his market of consumers and gain incremental revenue. Allen Howell says ” If I have a plane flying empty from one city to another I am a fool if I don’t open the seats on that leg to paying customers.”  “Think about it, the value we create by selling the seats on empty legs is five fold:”

  1. We increase the potential of building relations with future charter prospects
  2. We provide consumers with an experience that exceeds all expectations
  3. We create incremental revenue streams that go right to bottom line profits
  4. We increase and expand our circles of influence by leveraging the power of social media
  5. We begin to create repeat customers that are common to travel circles we service
Travel Tribes
Mr. Howell’s five points ought to seem obvious to private operators yet the majority seem to think leaving revenue in the air is a better choice.  Social Flights recently called 100 operators asking them if they wanted to sell seats on empty legs. We also gave them the opportunity to participate in a joint promotion with Expedia and Groupon. Both of these offers have no cost to the operators just revenue potentials. And the majority response was NO rather than YES for the most part.
Why? Here are the top five reasons operators choose to leave money in the air:
  1. I don’t have time to add my empty legs to your platform
  2. We don’t want to provide prices per seat
  3. We’d prefer it if you sold chartered trips
  4. We don’t want to participate in an Expedia offering
  5. We cater to people who can afford to charter our planes, not the general consumer.
To each of these responses we scratch our heads wondering if all operators are making so much money they don’t need any more revenue.
Thank you to those who choose to leave money in the air. There are plenty others willing to take it.  Will you leave it or take it?  

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