1) As you know, a flight's price is tied to underlying fare buckets. More demand, higher price. How do these flight subscriptions integrate into the airline's revenue management model? I can't imagine they offer last seat availability so is a subscriber set up for immediate disappointment when they realize they cant use their free flight on Thursday before Christmas even though it is available for purchase?
I feel like this scenario is the true devil in the entire flight subscription offering. The moment a consumer can't access their promised value prop they will cancel and it will be very difficult to regain them. Conversely, setting expectations that your subscription is actually a subscription to flights that are lightly booked is an entirely different value proposition.
2) On the frequent flier end of the spectrum, US airlines with revenue-based frequent flier programs are much, much closer to a subscription offering for their existing frequent fliers and one wonders why they haven't made this logical jump already. For example, United requires $24,000 in pure spend to make 1K status this year. Why shouldn't I be able to subscribe to 1K status for $2000 a month right now and receive all those benefits and a $2000 spending credit for flight purchases in the month? Seems like a no-brainer.
Thanks for your insightful questions Alex. And thanks again to the Volotea founders and team to also provide some input with these questions.
1) It’s an interesting point, and different airlines are handling it in different ways. Volaris and Flysafair for example have last seat availability. Alaska has two different versions, the normal and the pro, with the latter being more expensive and allowing last seat availability and the normal version requiring users to book two weeks in advance.
Speaking with Caravelo they mentioned that airlines aren’t approaching this in the way they approached reward flights in loyalty programs but rather as normal seat sales. That’s why Caravelo has put a lot of emphasis on different tools that allow airlines to shape their programs and effectively create the equivalent of fare classes, but in the form of different tiers or versions of their program.
2) It does indeed seem like a no-brainer and as I mentioned in the “paid loyalty” section of the article airlines like LATAM and Emirates already have products that look a lot like this. I can’t speak as to why US airlines have not done the same but I suspect it has to do with the fear of making the perks of the program less attractive to normal frequent flyers and, more importantly, to the banks that buy the miles from them.
Mauricio,
Great deep dive! A couple of questions:
1) As you know, a flight's price is tied to underlying fare buckets. More demand, higher price. How do these flight subscriptions integrate into the airline's revenue management model? I can't imagine they offer last seat availability so is a subscriber set up for immediate disappointment when they realize they cant use their free flight on Thursday before Christmas even though it is available for purchase?
I feel like this scenario is the true devil in the entire flight subscription offering. The moment a consumer can't access their promised value prop they will cancel and it will be very difficult to regain them. Conversely, setting expectations that your subscription is actually a subscription to flights that are lightly booked is an entirely different value proposition.
2) On the frequent flier end of the spectrum, US airlines with revenue-based frequent flier programs are much, much closer to a subscription offering for their existing frequent fliers and one wonders why they haven't made this logical jump already. For example, United requires $24,000 in pure spend to make 1K status this year. Why shouldn't I be able to subscribe to 1K status for $2000 a month right now and receive all those benefits and a $2000 spending credit for flight purchases in the month? Seems like a no-brainer.
Thanks.
-Alex
Thanks for your insightful questions Alex. And thanks again to the Volotea founders and team to also provide some input with these questions.
1) It’s an interesting point, and different airlines are handling it in different ways. Volaris and Flysafair for example have last seat availability. Alaska has two different versions, the normal and the pro, with the latter being more expensive and allowing last seat availability and the normal version requiring users to book two weeks in advance.
Speaking with Caravelo they mentioned that airlines aren’t approaching this in the way they approached reward flights in loyalty programs but rather as normal seat sales. That’s why Caravelo has put a lot of emphasis on different tools that allow airlines to shape their programs and effectively create the equivalent of fare classes, but in the form of different tiers or versions of their program.
2) It does indeed seem like a no-brainer and as I mentioned in the “paid loyalty” section of the article airlines like LATAM and Emirates already have products that look a lot like this. I can’t speak as to why US airlines have not done the same but I suspect it has to do with the fear of making the perks of the program less attractive to normal frequent flyers and, more importantly, to the banks that buy the miles from them.
I hope this helps,
Mauricio