Is it time for airline ticket sales to be reinvented? Sachin Goel, Founder and CEO of Optiontown asks the question.
For too long, air travel has been, and still is, an impulsive one-time purchase. As such, it is often based on the strongest influences at the booking moment — a slightly lower fare, a timing that seems 30 minutes more convenient, a new product, a new brand, a new gimmick.
Frequent flyer programs try to address this. But consider the mobile phone industry: how often does a subscriber switch telephone service providers? Rarely, if ever!
Imagine locking in your customers to blocks of 5, 10, 20 flights or more. Imagine not having to win customers’ loyalty on a trip-by-trip basis. Imagine securing up-front revenues, improving cash flow.
Many airlines, including British Airways and Vistara, the Singapore Airlines-TATA joint venture, have launched a disruptive innovation: Flight Pass. It helps in minimizing the cost, time and effort invested in the flight booking process. Compared to static, restrictive older airline coupon booklets, the new flight subscription can be customized by customers and revenue managed by airlines. So, a perfect win-win for both.
Flight Pass subscription is like selling corporate deals to consumers, who aggregate their future demand. Subscription brings long-term sales commitment by definition and creates loyalty as a by-product. Flight Pass subscription co-exists in parallel with loyalty programs, indeed offering better deals to loyal customers.
Don’t you think Flight Pass subscription offers the perfect formula for incremental revenues and to lock-in customers and lock-out competition? Let’s compare with single ticket transaction model. In subscription, the customer can lock-in a price for a number of trips and self-define all the terms like number of destinations, peak or off-peak travel periods, the lead-time for booking, the names of multiple passengers, and so forth.
Airlines can fully revenue manage the subscription pricing; the price per flight offered depends upon the conditions chosen by the customer and is dynamically calculated by subscription revenue management algorithms based on pre-determined rules fed by the airline. Subscription increases customers’ willingness to pay as they tend to pay more for greater freedom and premium features, flexibility, and convenience.
But because they self-selected, they are happy with their decision and do not feel pressured. The customer may then freely book flights as per their desire, according to their rules. If the customer needs to step outside the self-imposed rules, then a nominal fee may apply for the same, driving additional revenues. Customers fly more once they get into subscription model as it is easier to book and fly. The subscription model allows airline to reduce number of low fare promotions required as customers are locked in. Let your competitors enter into low-price battles while you increase your yields and revenues at the same time! A subscription model also generates additional profits from partially utilized credits or underutilized premium features.
The benefits of a flight subscription can be shared with friends and family effortlessly. All the included members can use as many flight credits as they want without any pre-fixed limit. Thus, the subscription can be used by corporate and business travelers, by those who travel regularly to specific destinations, by families for leisure trips or by students, and many other customer segments.
A light touch implementation with no capital expenditure and no IT development always sounds too good to be true. It is time to re-think the fundamental paradigm. Risk fighting for every single ticket sale or build subscribers paying you hundreds or thousands of dollars per month for years to come.