Encouraged by successes at Air Canada, more airlines are considering unbundled pricing options that add to or subtract from base fares. Airlines maintain that such opportunities allow travelers to tailor air travel services and products to meet their needs, but corporate travel managers see challenges and have expressed some discomfort with the nascent concept.
"You buy a ticket but if you want to breathe clean air when you get on the airplane its another price; if you want a clean seat you pay another price," quipped Applied Materials global travel services director Kevin Maguire. "There is no standardization anymore and there is growing concern as to what our contractual agreements really mean."
Questions related to travel policy compliance and expense reimbursement also cloud the issue. Can travelers confidently pay extra to check bags, collect frequent flyer points, change their itineraries or even make or change seat assignments without running afoul of managed travel program parameters? Do travel managers even want their travelers spending time to compare pricing options for such service components?
Speaking this week at the Association of Corporate Travel Executives conference in Miami, Farelogix chief marketing and product officer Dave Cerino suggested that business travelers in the near future would be offered customized pricing and service options as part of a "spot-buy" environment. Additional legroom, aisle seat selection, expedited airport screening and club passes all can add to the cost of a ticket, but also can enhance traveler productivity. "If your policies do not support these types of expectations, those policies can be affected negatively," he said.
For now, such questions are moot in many cases since airlines are contemplating a la carte pricing only on their Web sites, which are generally off-limits to managed travelers. But that could change if and when global distribution systems can accommodate such airline strategies and bring unbundled pricing to more travel agency and online booking system points of sale. "We are committed to investing in products like merchandizing and unbundling, which will be the wave of the future," said Galileo by Travelport senior director of airline services in the Americas Jean Collier, speaking in April at the UATP Airline Distribution 2007 conference.
Air Canada claims that a growing number of travel agency bookings--including those for business travelers--are coming through its Web site. Along with the fact that some of Air Canada's lowest fares are available only online, this has helped increase the applicability of the carrier's a la carte approach (thus far among the most thorough) to the managed travel market.
"Of those individuals who look at our lowest fare, which we branded as Tango, in an environment where they are given a choice to buy a seat [assignment], upwards of 30 percent are opting in for the extra $15," said Marc Rosenberg, Air Canada's vice president of sales and product distribution. "[Customers] like the concept of choice: 'I am choosing, I am deciding, I like this brand.' And we are moving forward. On the higher fares, they can buy one-day lounge access."
Liz Claiborne Inc. is one company that is allowing its travelers to select components of Air Canada's product offering. "In terms of allowing people to pay for their seat selection and meals in Canada, we agreed to do it for them because if there's a sold out flight and you don't have a seat assignment, you're out," said Rafael Rosario, the company's global travel services manager, during the ACTE conference. "The way it is now, you can select a seat for C$15 (US$13.61) and then it's C$4 (US$3.63) for food if your flying [for example] Montreal to Vancouver, so we add that to the cost of the ticket."
Another set of Air Canada products only available online--the relatively newer, pre-pay, bulk purchase Flight Pass programs--now account for 15 percent of Air Canada's business on the busy routes between Montreal, Ottawa and Toronto, Rosenberg said.
Other airlines including AirTran Airways and Frontier Airlines now are considering if and how to bring pricing and service variations to customers. "Like everybody else in the United States, we watch that closely and see a lot of value in that," said Travis Christ, vice president of sales and marketing at US Airways, also noting Northwest Airlines' tinkering with assigned window and aisle seating. "People are willing to pay for certain services. I suspect we are going to go down that road. It is a matter of when we have the resources and technology to make that happen."
In a recent Sabre Airline Solutions survey, 197 leaders at 191 airlines deemed seat selection the [ancillary] revenue source most likely to be effective (cited by 35 percent of respondents), followed by inflight entertainment and meals. Such inflight comfort items as pillows and blankets appeared to offer the least effective opportunity for new revenue, cited by just 17 percent of survey respondents.