Air Canada last week began selling unlimited-travel passes between the U.S. and Canada for a flat monthly fee. Meanwhile, Spirit Airlines this month said beginning in June it would unbundle fares, allowing customers to add or omit such services as checked baggage or inflight beverages generally included in airfares.
The new offerings buck conventional fare models, spur users to book directly with airlines and, in some cases, work against managed travel practices. Air Canada last year introduced other similarly nonconformist products as unbundled fares—a move Spirit is initiating in the United States—and prepaid corporate flight passes.
Air Canada's Web-only offerings are drawing travel buyers, travel management companies and technology firms to create workarounds that help track such bookings. Meanwhile, Spirit is charging buyers more for global distribution system transactions.
Guylaine Lavoie, Air Canada director of marketing innovations, the department that develops and oversees its pass programs, last week said the carrier launched an unlimited pass in Canada last fall. Although the product is not specifically geared to the corporate market and is unavailable for negotiated discounts—that's the realm of the Corporate Pass
(BTN, Oct. 23, 2006)—Lavoie said some Canadian companies have deployed the unlimited passes for their most frequent travelers.
"We know that we have some customers who work for large corporations or smaller corporations, where the company will pay for them," Lavoie said last week. "We also have some specific products for corporations, where they can list all of their employees on a Corporate Pass. At the moment, we're not planning on having the unlimited concept in the corporate environment."
Air Canada is offering several versions of the unlimited flight pass, the most flexible of which costs $3,550 per month for a six-month commitment. Other unlimited pass segment options vary by geographic zone, fare category—either the Tango Plus or the less-restricted Latitude—and commitment lengths of either three or six months. Depending on which region, fare class and time commitment travelers elect, prices range from $1,656 to $3,788 per month. Air Canada said the product does not carry blackout dates or booking-window restrictions, but must be booked online at least two hours in advance of travel.
The carrier last year told corporate customers they would receive its best negotiated rates only through the Corporate Pass, which is redeemable on flights in predetermined geographic zones. However, buyers who said they were being pushed into the program griped that air passes require travelers to book through aircanada.com and must be purchased up front—or at least in monthly lump sums—while reporting and tracking capabilities are lacking
(BTN, Oct. 23, 2006).Buyers generally agreed that the newest pass product is not for the corporate market. "There are people who are using it, but not necessarily large corporations, because they've got the managed travel program," said Tanya Racz, president of the Canadian Alliance. "It's more suited to people who own smaller businesses who perhaps have three or four road warriors."
Another buyer, requesting anonymity, said such programs—only redeemable through the airline Web site—run against corporate travel policy. "If it makes sense from a value proposition, then great," said one Canada-based travel buyer, "but you're not going to have all the added value of corporate travel. Risk management today seems to be our number-one issue—traveler tracking, emergency services. None of the stuff on these Air Canada passes really allows that to happen. The total PNR needs to be configured to know where they're at sometimes."
Concur Technologies this week during the Canadian Alliance's 3rd Annual Conference & Exhibitor Showcase plans to preview technology for Canadian travel buyers that "connects Cliqbook Travel directly to Canadian air and Via Rail content, which is currently only available from the suppliers' Web sites."
Likewise, president of Calgary-based ATCO Travel Vaughan Payne, who also serves as the corporate travel manager for ATCO, is in the midst of working directly with Air Canada to incorporate work-around technologies for the corporate pass programs. Right now, Payne noted, it has become a manual process to link flight information from aircanada.com bookings—where flight passes must be booked—and into corporate data tools. "We're working with their technology people," Payne said last week of Air Canada. "They put together a group to work with us. What we're trying to do is a work-around to mitigate the issues around a manual process. We want to combine the GDS with the flight pass with full reporting, accountability on risk management for emergency services and have a very clean process for online booking tools. We need to get that all into our back-end reporting and keep it all very clean."
An Air Canada spokesperson said travelers could use the unlimited-flight pass between any of 53 departure points in the U.S. and the 67 airports the carrier serves in Canada. However, other variations limit travel to predetermined origin and destination cities. These options include the Canada Commuter pass, the Eastern pass and the Western Pass.
Air Canada in the past year has been in the vanguard of implementing novel fare products. In addition to several pass products, the carrier late last year unbundled fares through its Web site, allowing travelers to customize bookings by adding or omitting such a la carte options as lounge access, inflight meals and checked baggage, among others
(BTN, Nov. 6, 2006).Spirit Airlines on June 20 will begin offering all of its inflight services—including checked baggage, beverages and snacks—a la carte and stripping them out of the base fare. Chief marketing officer Barry Biffle said the move will enable the carrier to reduce its overall fares by up to 40 percent in some markets.
"We're piecing out the product. You can pay for what you want, but you don't have to pay for the things you don't want," Biffle said last week. "If you back up 10 years, if you wanted a song you had to buy the entire CD. Now you can go to ITunes and get one song for 99 cents."
On the menu, Biffle said, are checked luggage ($5 apiece for up to two), beverages ($5 for alcoholic, $1 for non) as well as miscellaneous snacks. Biffle also said Spirit will sell its front seats with extra pitch at an additional cost, but is doing away with the class system.
"Big Front Seat is the front of the cabin, but it's not a separate class," Biffle said. "We are eliminating our business class and our overall two-class product. We're still gong to have a Big Front Seat, but it will be single class. The name of the product is that literal: Big Front Seat. It is what it is. There's nothing else to it: no personal service, no comped drinks. It's just the Big Front Seat."
Biffle said for GDS bookings—which only make up about 15 percent of gross bookings—travelers still would be able add on the unbundled options when they check in through spirit.com. However, Biffle said GDS bookings would be $5 more than those booked through its own site. Biffle said the carrier recently pulled out of Worldspan and Expedia—noting that the latter represented only 3 percent of bookings but 17 percent of distribution expenses at Spirit.
"We haven't made a decision to go all direct," Biffle said, "but we're going to be monitoring over the next six months if we get as much nonticket revenue and ancillary revenue from the third-party channel, or if that is an opportunity cost. "
Spirit and Air Canada, however, remain the outliers in a la carte pricing initiatives. Apart from some airlines now offering one-day lounge access and Northwest Airlines' Coach Choice offering—through which travelers can pay for more desirable coach seat assignments—the domestic legacy carriers said they had no immediate plans to tailor their offerings in such an unbundled way when Air Canada launched their menu pricing late last year.
Darryl Jenkins, director of George Washington University's Aviation Institute, noted in a presentation at last month's Masters program that, "there is not much of a move toward Air Canada's fare structure," referring to its unbundling initiative. "It is becoming less and less likely that there may be a change in the fare structure yet," according to Jenkins.
However, American Airlines executive vice president of marketing Dan Garton said such nontraditional pricing configurations are worth exploring. "I think all of us—having just gone through 6 years of losing money—are thinking, 'Hmmm, are there things we should be doing differently?" he told BTN earlier this year. "Creative thinking and experimentation are well-needed here. I support the evaluation of those and experimentation. If Northwest finds their effort to be successful, Godspeed to them and we'll eventually probably follow along with them. I'm not saying that will necessarily happen, but I like to see airlines doing this. We just have to make sure we don't allow ourselves to fall asleep at the switch here. We don't have to lead every initiative or every innovation, but we better be aware of every one of them."