Posted by Seth on March 3, 2010 under News, frequent flyer | 
Continental’s announcement this morning that they will begin charging non-elite members for the seats with the most legroom has raised a number of questions. The company released an internal memo to all employees explaining some of the details behind the program. Here’s what it had to say:
Questions and Answers about CO’s Premium Seat Program
Why not just continue giving the better seats away for free? It has worked for years.
CO is focused on making money, and we aren’t going to be able to do that by doing the same things we have done in the past. There is additional revenue from new products, like extra legroom seats that are already in our coach cabin, that we have not effectively unlocked in the past. It makes no sense to give away the best seats in coach to non-Elites for free. So we are changing that, and will bring in new sources of revenue we’ve not tapped in the past.
Will our customers be willing to pay for extra legroom on the aircraft?
Yes. Certain customers strongly value having more space on the aircraft. On the other hand, some customers don’t value extra space. Customers will pay for the things that they value, and extra legroom is one of those things. Many other airlines like United, Virgin America, Singapore and British Airways have successful programs selling extra legroom.
Which seats on our aircraft are classified as premium seats with extra legroom?
Initially this program is focused on selling seat assignments for exit row seats that have extra legroom. We expect to start selling bulkhead seat assignments in the future. The exact seats that will be available for sale will vary by aircraft type. For example, not every exit row seat has extra legroom, and those seats would not be included in the program.
How much will the premium seats with extra legroom cost?
Pricing will vary based on numerous market characteristics, including length of the flight. We’ll experiment with various prices, and that will give us solid data upon which to base future pricing decisions. For example, extra legroom seats between IAH and EWR might be offered at $59. Certain days like holidays or weekends might get discounted pricing. All check-in applications like continental.com and kiosks will have the prices of seats at check-in.
If the only seats left on the aircraft are premium seats, will we force passengers to pay extra for them?
This is a pretty unlikely scenario, but if it happens, we won’t require a passenger to pay extra to obtain a seat assignment.
Will pass riders have to pay in order to obtain a seat with extra legroom?
No. Pass riders will be given these seats for free when they are available. Charging non-Elite revenue passengers for these seats should increase their availability to pass riders, as there will be customers who don’t value the extra legroom enough to pay for it.
None of the answers are particularly surprising – except for where they expect folks to pay $59 for an exit row from Houston to Newark – but the tone of the email definitely is. Continental’s inclusion of British Airways and Singapore Air in the list of companies that sell extra legroom is also quite interesting considering that those airlines actually have a wholly separate product that they are selling, not just a couple seats on the plane, and their Premium Economy product comes with other benefits as well. And while the bulkhead seats generally offer extra legroom there are also compliance issues with selling those seats. Continental will need to be very careful about that while ensuring that they can meet their obligations for passengers with limited mobility.
Also of note is the comment about bringing in “new sources of revenue” that have not been previously tapped. This leaves the door wide open for the airline to start charging for even more individual benefits than they do today. From the complimentary “meals at mealtime” to carry-on baggage, it is hard to take anything off the table at this point.
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Posted by Seth on November 24, 2009 under Internet |
Yeah, it seems that beating up on Aircell and the adoption of their gogo in-flight internet service seems to be a recurring theme in the industry. But that doesn’t mean that it isn’t possibly deserved. There are a ton of questions out there about just how bad their cash flow situation is. And the answers and information coming out of Aircell doesn’t seem to be helping their cause.
Runway Girl, as always, has some great information on this issue in a recent post: Does Aircell get an average six users per flight? – Runway Girl. Here’s the gist of it. Aircell is claiming 100,000 users per month, which sounds like a big number. But when you divide that out by the over 600 planes in the air with Aircell service and an average of 4 flights per plane per day the numbers are much more worrisome. The math works out to six users per flight. Just six. Considering that they are likely eating the whole cost of the installs and potentially also sharing revenue with the airlines that number just isn’t sufficient to sustain the service.
Sure, things are looking up right now with the expectation of much higher adoption this holiday season. That is due, in large part to the fact that it is free on many carriers. American Airlines, Delta and Virgin America have all struck deals of various sorts for free access (the Virgin America one is, by far, the most broad). And users definitely seem to be enjoying the service. On my recent Virgin America flight there were definitely more than 6 users online but the overall user experience suffered for it.
If the company cannot get sufficient demand at the appropriate price point such that they are going to be profitable then they are in big trouble. If they get that demand but the performance stinks they’re in an even worse position. It is hard enough to attract customers to such a service. Keeping them after a bad experience or three where the costs are not trivial is going to be pretty difficult. I fully admit that one experience does not make a trend, but I’m still worried for them.
No matter which way you look at it the future of in-flight internet is, at best, a hazy proposition. And Aircell is the fuzziest of them all since they’ve got the most exposure right now.
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Posted by Seth on November 23, 2009 under News |
Wow…as if I couldn’t come up with another reason to hate the Senior Senator from New York any more (he was a strong proponent of the ETSA visitor tax, too), he has decided to wade into more travel-related policy and, again, he’s headed the wrong direction. This past weekend his office noted that the Senator is considering holding hearings regarding airline frequent flier programs and their policies towards mileage expiration and redemption.
Schumer says he suspects consumers are actually paying for frequent frier programs through air fare and fees. If so, he said rules are needed to protect consumers. He’s asking the Department of Transportation to review the complaints.
"As the holiday travel season approaches, we cannot let airlines and credit card companies continue to fly off with hard-earned frequent flier miles," Schumer said in an announcement scheduled for Sunday. "When a consumer accumulates valuable frequent flier miles, they should not have to constantly worry that they are going to expire with little or no notification from the airline."
There are so many things that are wrong with this approach that it is hard to know where to begin. Most worrisome is the implication that the points have some explicit value ascribed to them. Historically the points have not held and specific value – after all the redemption value varies based on what type of reward the consumer chooses – and having no value has been of critical significance with the earning of those points. Why? Because a gift or reward of zero value cannot be taxed. The IRS has stated that points are not taxable right now. But if the Senator manages to define a specific value that they carry the earning and redemption of those points may soon incur a tax burden as well. So much for helping the customer there, Chuck.
Don’t get me wrong – I agree that there are plenty of people out there who have no idea how the programs really work nor how to maximize their value from those programs – but that doesn’t mean that they need help from the federal government to figure it out. How would the Senator treat the programs that were established from the very beginning with an expiration policy on their points (Virgin America’s eleVAte and jetBlue’s TrueBlue were both set up that way from inception)? Are they misleading and confusing as well? Or is it just the legacy programs which have changed their rules over the 25 years they’ve been in existence? Does he really expect that the programs wouldn’t change over more than two decades? Of course they will adapt to the changing industry.
The other statistic cited in Schumer’s claim is that 20% of the estimated 10 trillion points out there right now may never be redeemed. That’s actually a very reasonable level of breakage. What’s the level for mail-in rebate programs or other schemes that actually have defined value? I’m guessing it is comparable, if not higher.
Finally, it is worth considering that the frequent flier programs seem to be the only way that the airlines consistently can generate revenue. It may prove to be a bit of the “goose laying the golden egg” problem should the airlines have to dramatically change the way the programs are handled. So instead of minting miles and selling them to credit card companies to help fund operations the airlines will no longer be able to do that and we’ll see a carrier or two likely fail. Great work, Senator!
Seriously, there are many other more significant things that our government can be doing to help its citizens. Meddling in the airline frequent flier programs simply isn’t one of them. Find something better to do with your time and our money, Senator. Please.
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Posted by Seth on November 13, 2009 under News |
Yeah…that’s me quoted in this article on cnn.com, making the point that it isn’t just leisure travelers or “kettles” who are responsible for the problem. And I stand by my claim: “Business travelers never want to check a bag; they want to get off the plane and go.” Those are the passengers who likely wouldn’t have to pay the checked bag fees but they (we, really) carry-on anyways. And many times it is two bags in the overhead and nothing at the feet. After all, that little bit of leg room is precious.
I really have to laugh at the claim in the same article by Joe Brancatelli, an “expert” on frequent flyer habits. His claim that “[Business travelers] know the rules…and they’re prepared to hit the rules,” is a farce. They know the rules and they also know that as customers with status in the frequent flyer programs they are going to board first, take up as much space as they want and not care about anyone else. Oh, and they’ll pitch a fit if someone suggests that they aren’t allowed to carry the bags on.
Every time I see one of those fits pitched it is by someone claiming to have status or more power or who is never going to fly said airline again. And every time I laugh my ass off.
I flew from Los Angeles to New York City earlier this week on Virgin America. I watched as about 40 bags were gate checked. I chatted at baggage claim (my bag was WAY too big to fit at the end of a 10 day jaunt) with one of the passengers who was late to board and had to gate check her bag. She “packed a smaller bag specifically to avoid waiting at baggage claim.” Of course, when the bag came out I chuckled a bit as there was no way it should have been a carry-on. But who’s fault is that? Checking that first bag would have cost her $20 so I can understand wanting to avoid that, but no one was enforcing the sizing rules telling the customers that they have to check the bags. As for all the customers who had to check their bags – not one whining, complaining or fit-throwing among them.
It isn’t a problem for the most part in Europe. Either the agents are enforcing the rules much more strictly or there is better self enforcement. But the same problems do not exist there at nearly the same level. I don’t know why, but it just works better there.
I doubt the airlines are going to step up and spend the cash on the extra man-hours it would take to have their agents effectively police the situation. They certainly don’t seem inclined to do it for a long enough period of time that they actually manage to change the behavior of the traveling American public. Then again, with the TSA prohibiting customers from effectively locking bags and the constant stream of stories about theft and loss in the baggage handling departments I can’t blame anyone for not wanting to gamble with their bags that way. It is a lose-lose situation. And it sucks for everyone.
Posted by Seth on November 11, 2009 under Internet |
For a while now I’ve been a rather strong proponent of the theory that paid in-flight internet isn’t going to attract enough business to survive, at least not with the current pricing scheme. I just don’t think that there are enough people out there willing to pay $8 or more per flight for the access that is available. Of course, the good news for those few deep-pocketed (or reimbursed) folks out there is that not many others are using the service so they get pretty good performance from the system.
But what happens when the cost barrier disappears? This.
Yeah…that pretty much sucks. Maybe it was the fault of the schmuck across the aisle who thought it was a good idea to have a video chat with folks on the ground. Or maybe there are several dozen folks on the plane using the service rather than the average 10-20% that normally do. And maybe it is just that the intertubez are slower over Iowa than elsewhere in the country.
Regardless of the reason, it seems that when stressed the in-flight systems start to bend under the load. They haven’t failed outright (at least not yet) and having any free coverage is better than having none. But I also wonder what the chances are that customers paying $13 for a transcon flight will put up with the lower performance metrics that come with a system that several customers actually use. I know that I wouldn’t. Then again, I probably wouldn’t pay for it anyways.
I don’t know if the speed issues I’m seeing are really typical of a heavily loaded system but if they are then Aircell has a lot of work ahead of them to get the gogo system scaled up to deal with the utilization that they need to realize for profitability.
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Posted by Seth on October 21, 2009 under Internet |
In a move that hasn’t garnered nearly the same publicity as Virgin America’s announcement that they’re teaming up with Google, American Airlines has announced that they are teaming up with Lexus to provide free wifi to users of the gogo system on their flights. The AA promo is much more limited – only 7 days – and requires one to know a special promo code – 2010LexusLS – so it isn’t nearly as good as the Virgin America deal. But something is better than nothing.
Full details on the promo are here.
Posted by Seth on October 19, 2009 under Internet |
Two big stories out today about in-flight connectivity, both of which have me very excited.
The first is an announcement from Virgin America and Google that the latter is going to be sponsoring the gogo service for a two month period – November 10 – January 15. No credit card, no restrictions. Just an email address and accept the Terms of Service and you’re online. Considering that I have a flight booked my first on Virgin America) for November 11 from Los Angeles to JFK I’m pretty happy about that for very selfish reasons.
The second story comes from The Runway Girl, one of my favorite reads for in-flight entertainment news. She’s at the NBAA conference this week and has been reporting all sorts of cool stuff. The coolest, however, is an announcement from LiveTV, the jetBlue subsidiary that operates the in-flight TV systems for that carrier and Continental, among other things. LiveTV has been suggesting that there is a good chance additional in-flight internet connectivity will be coming online in 2010 and the latest news is that they’ve got an antenna ready to go for providing the service. Even better, the cost of operating the service is so low that they expect airlines to be able to offer it on a complimentary basis to passengers. Oh, and did I mention that the service would be available absolutely anywhere on the globe – including the polar regions – thanks to the fact that it uses the Iridium satellite network? This is nothing short of huge in terms of in-flight connectivity.
Now we just need LiveTV to finish up the R&D part of the project and get to the implementation phase so that I can have my emails for free in flight.
It is pretty clear that there is a demand for internet connectivity in-flight. And the fact that companies are continuing to find ways to reduce the costs to the end-user – something that will be critical to actually seeing high adoption rates – is a wonderful thing. Free is always better, right?
Posted by Seth on August 22, 2009 under Internet |
Earlier in the month there was some big news from in-flight internet provider Row44 – they received approval from the FCC to operate their gear on airplanes in the USA. The other shoe dropped yesterday, with Southwest announcing that they are going to be equipping their entire fleet with the system.
Southwest Airlines and Row 44 are continuing plans to roll out wi-fi beginning in the first quarter of 2010. Beginning this fall, Southwest will be moving to the next step of certifying Southwest’s full fleet with plans to begin fleetwide rollout of the Row 44 satellite service in the first quarter of 2010. The airline has been testing the service on four aircraft since Feb. 2009 and has received fantastic Customer feedback on the product.
Their plans for deployment fleet-wide are not the first (AIrTran Virgin America have previously committed to fleet-wide deployment) but they are the broadest. By far. Southwest operates over 3200 flights/day on about 550 planes. That is a lot of systems for Row44 to sell and a lot of coverage to provide.
The pricing has still not been determined (or at least not announced) so that remains a big question mark. Southwest is different than the other carriers offering WiFi in that their average stage length is much shorter – only ~650 miles per flight. For a per-flight subscription they’d likely have to charge much less than the others to have a fairly valued offering. Or they could just offer a 24-hour plan to cover all the hops on Southwest that day. That makes more sense given the flight patterns and route scheme that Southwest uses.
More coverage from Runway Girl, who apparently got a head’s up prior to the official announcement.
Posted by Seth on August 11, 2009 under Uncategorized |
Sure, airlines are mostly still cutting capacity, but every now and then a new route crops up on the schedules. This week it seems that Ft. Lauderdale is the winner of two such announcements in a big way. The first announcement came from Virgin America, indicating their plans to offer up four daily flights to California (two each to San Francisco and Los Angeles). Not to be outdone, jetBlue announced a couple hours later their intention to offer the “first nonstop service” between San Francisco and Ft. Lauderdale. And, while they are first, they are really only alone in the market for a day; the Virgin America service starts the day after jetBlue launches theirs.
The moves are certainly interesting and for several reasons. First, who knew that there was such a pent up demand for travel between South Florida and California? Right now there are seven daily flights between Miami and Los Angeles and another three from San Francisco to Miami, all operated by American Airlines. The represent a lift of some 1500 seats across the country. The introduction of these five flights will increase that capacity by about 35%, albeit from Ft. Lauderdale, not Miami. That is a huge increase in a market that has long been seen as questionable in terms of revenue. Oh, and jetBlue flies Ft. Lauderdale – Long Beach daily, too.
Beyond that, why Ft. Lauderdale? For jetBlue it makes a lot of sense. The New York-based carrier already has significant operations in Ft. Lauderdale and this is actually sortof bringing back a route they used to operate (Ft. Lauderdale – Oakland) that disappeared a few years ago when it wasn’t making any money. jetBlue can offer onward connections to the Caribbean and the rest of their network. For Virgin America, however, it is a strange choice. Operating out of Ft. Lauderdale is cheaper, and it also means they don’t really have to compete against American. After the heavy duty fare and bonus points wars in the Boston market earlier this year I’m sure that they’re pretty happy about that. But the smaller carriers are rarely too concerned about going for the jugular against incumbents. Is it possible that Virgin America sees the Ft. Lauderdale area as able to deliver better yields than Miami can? Lots of things have left downtown, including a lot of the wealthier residents, heading north along I-95. It seems that Virgin America is gambling that the business travel market is desperate to make a similar move.
The new schedule from jetBlue also has them removing their one-stop service via Austin, Texas. The good news there is that the San Francisco – Austin flights will now be at much better times for the locals on those routes.
Adding this much capacity to any market seems like revenue suicide for those involved; seeing it happen on transcons (more expensive to operate) in a market that has historically been very much focused on leisure travel is even stranger. Still, look for plenty of promotions and bonuses to be coming out in the weeks ahead as these new routes look to build up loads.
Posted by Seth on July 14, 2009 under Internet |
While I love the concept of Aircell’s gogo in-flight internet service, I never really felt that the pricing made much sense. It is too expensive on the shorter flights and since the vast majority of passengers are connecting the costs could really get out of hand in a hurry. Aircell appears to have seen the light a bit and has announced a couple different alternate pricing options since the initial $13/$10 launch point.
The latest pricing option seems to be a change for the $13 version. Previously it was offered for flights greater than three hours in duration. It is now being reported that as of July 15th the $13 option will be a 24-hour day pass. That is great for folks with connections, day-trips or other similar schedules who will have multiple flights in a single day. There is also the $50 monthly option that is available on either Delta or Virgin America. Not sure why they can’t make the monthly good on all their systems regardless of the carrier but I’m willing to bet it has something to do with who gets paid how much for the subscription.
Both of these options, along with the $8 mobile device option are moving very much in the right direction of reasonable pricing for the service. Hopefully the downward pressure on the pricing will continue and it will become a more reasonable opportunity. Or I’ll just continue to read books on my Kindle (which I love) while listening to music that I bring on-board. I do like the down time quite a bit.
Posted by Seth on March 19, 2009 under Uncategorized |
Airlines seem to be paying scant attention to the economic downturn these days, with fare wars breaking out all over the place. Since Virgin America announced plans to start operating flights from the west coast to Boston American Airlines has been playing a lot of defense. Frequencies have been increased and bonus miles showered on customers.
Things got a bit more interesting today with an announcement from jetBlue that they, too, are entering the bonus fray. The carrier is offering a “buy 2, get 1 free” deal for their TrueBlue members until May 31st. The reward certificate will be issued after June 15th and is only valid until December 15th, so not particularly great there. Also, jetBlue is limiting the deal to a single bonus reward per customer, unlike the AA deal that is wide open for earning as many miles as one can handle flying. The single advantage that jetBlue seems to have is that they are offering to the deal for many more cities than AA is: Long Beach, San Diego, San Francisco, Oakland, Seattle, Denver and Las Vegas are all part of the promo. You have to register here if you plan to take advantage of this deal.
I continue to be amazed by the ability of jetBlue to take a reasonable promo opportunity and completely tweak it to squash the value that it could potentially have. I get that they aren’t out to give away the farm, but I also have to think that eventually their customers are going to wise up to the limitations of the TrueBlue program and realize that it really isn’t very good.
