Phoenix - US Airways president Scott Kirby last week during
the company's first-quarter earnings call said the carrier's Choice Seats
product has become "a big revenue line," on track to garner $100
million in 2013. That projection is modest, Kirby told BTN, as it assumes revenue only from current distribution channels,
a list that is expanding. US Airways last week announced that Fareportal,
an e-commerce company that operates online travel agency CheapOair.com, began
selling the product as per the carrier's distribution agreement with Sabre.
Meanwhile, Kirby also has been integral in US Airways' merger with American Airlines, US Airways CEO Doug Parker said last week. Kirby joins Parker, AA CEO
Tom Horton and AA senior vice president and chief Integration officer Bev
Goulet on the "transition committee" overseeing integration planning.
Kirby last week sat down with BTN
senior editor Jay Boehmer during a US Airways media event here to discuss
corporate relationships and distribution. An edited transcript follows.
How do you approach corporate relationships in the midst of integration planning?
We still manage as two separate airlines, but we hear from a lot of corporations that they're excited about the merger. Some have even said, "We were going to switch to United or Delta, but because of this, we want to renew." The day after the merger [closes], we'll have boots on the ground out with corporate accounts, trying to expand existing deals and win new deals. Today, there is a lot of discussion about the future, and I think it's made it easier for us to retain and even win new accounts, because they anticipate a future where we can accommodate all of their travel needs.
In the meantime, if a deal expires in, say, June, is the impulse to extend and then revisit after the transaction closes?
It depends on the specifics of each client.
AA seems to be more entrenched than US Airways in the travel management company segment. What is US Airways' approach there?
I suspect that we will have deeper relationships with them. We have good relationships with them today, but clearly they have deeper relationships with American. I expect we'll migrate to something that's closer to the American-type relationship.
How much of the growth in Choice Seats revenue is contingent on expanding the distribution footprint?
It's growing naturally today, without expanding distribution channels. It's at a run-rate of about $100 million of revenue today, but expanding distribution channels is really the way to have the exponential increase in that revenue, for two reasons: One, I have more channels so it would be obvious we would sell more. But, second, you can put more seats into the Choice Seats program. Today, those seats are blocked off from access for people who aren't booking direct, so for our travel agency customers, the seats aren't available.
Also, by the way, we have seen a large shift in the past couple of years in direct distribution—more people coming to usairways.com. Some have come from brick-and-mortar agencies, but mostly from online travel agencies.
The fact that those OTAs don't offer [ancillary] products, I think, has been a big part of the driver. For what it's worth, we're willing to let any of them sell it. We're not trying to withhold the content from them—they just got to do it. They have to invest. We're willing to let any of them. We have Fareportal doing it now, and it think that will help Fareportal; they've got a competitive advantage against the others. As that happens more and more, I would hope the others get on board, and eventually the brick-and-mortars will get on board as well. It's a product their customers want.
Is there an agreement yet to sell that with the other global distribution systems?
Sabre is the only one.
Are you applying revenue management principles to Choice Seats or is it more of a static price?
We're in the infancy of that. We don't just have a static price. We have what we call stadium pricing, so we can price every flight different and price every seat on the aircraft different. But we don't have great automation yet like we do in yield management for dynamically pricing. We're in our infancy, but those are things we're developing. We'll continue to get more sophisticated in our pricing for those products.
Choice Seats is a logical fit for expanding distribution. What else do you want to put on more shelves?
I think we'd make anything available that we sell and that our partners want—prepaid bags, for example.