Alaska Lowers First Class Fares, Sells More Seats

There’s been a lot of talk of supply and demand here on the blog this week, so I figured, why not pile on? Unlike our Monday discussion, however, this one isn’t controversial at all. Alaska has been lowering First Class fares. The result? More people buy First Class seats. Thank you, Captain Obvious.

Alaska Sells More First Class

On its recent earnings call, Alaska said that it had seen its paid First Class loads factor rise by two points in the last year, and revenues went up by 20 percent on an only 7 percent increase in seats. Good news all around. How did they do it?

Some of it is thanks to the more long-haul flying that the airline does. People may not care about First Class for the less than two hour flight from San Francisco to Portland, but they sure care a lot more on a 5+ hour flight to Hawai’i or a long haul from Seattle to Newark. Hawai’i in particular has really ramped up in the last couple years to become a major part of the airline’s route map, so that alone can make a big difference. But it’s more than that.

Alaska President Brad Tilden noted that back in the day, the First Class cabin barely earned its keep even though the fares were really high. Then this happened:

. . . we brought the First Class fares way down, I think our current add-on over the [full coach] fare is $150 in the longest stage length market. I think our customers have really responded to that value. We’ve gone from maybe from 1 to 1.5 [First Class] seats per airplane to four or five [First Class] seats per airplane. And we’ve also done a lot better with the upgrades, the fares that our mileage plan customers are paying to sit in first-class. And if neither of those work, we are selling first-class upgrades at the gate. I think we had a 20% increase in first-class revenue in the second quarter, and we are doing it in a way that our customer, I think, feels like they are getting really good value.

The decrease in fares isn’t a recent thing, but since it was brought up in the call, I thought it was worth discussing.In the end, this has resulted in a big revenue increase for the airline, and that’s great for everyone involved. The airline makes more money by selling more high fares, but the customers win because those “high” fares are lower than they used to be. This was the same kind of thing we did at America West back in 2002, though that was for the entire fare structure and not just First Class. The result, however, was the same.

So why don’t other airlines follow? Well, other airlines have a different passenger mix. Some of the big old legacy carriers actually sell more of those First Class seats, so cutting fares and increasing demand might actually result in dilution. It’s really an airline-specific type of thing, and only those airlines that don’t sell a ton of the high fares can afford to cut them down.

If you’re Alaska and you’re only selling 1 First Class seat per flight, you can cut the fare in half as long as you sell at least two of those tickets. Then everyone’s a winner. And that’s apparently exactly what’s happening here.

(Visited 97 times, 1 visits today)

Get Posts via Email When They Go Live or in a Weekly Digest

Leave a Reply

53 Comments on "Alaska Lowers First Class Fares, Sells More Seats"

avatar
Sort by:   newest | oldest | most voted
Frank
Guest
If AS is 1) selling F to people because it’s not a huge add-on over Y, then 2) getting its elites to pay for higher fares in order to be able to upgrade, and finally 3) “if neither of those work” selling F upgrades at the gate, everyone may be a winner except for AS elites. The described strategy means that the pool of potentially upgradeable seats has been depleted tremendously (typically down to 0 on Hawaii routes and close to 0 on transcons). So one of the benefits of being an MVPG, complimentary upgrades on any fare class at… Read more »
Anon
Guest

To clarify, selling upgrades at the gate has no effect on elites, who have priority over purchased-upgraders. Upgrades are only sold at the gate if all free elite upgrades have already cleared (which now includes all Delta elites too).

longtimeobserver
Member

HP also successfully experimented with reduced F premiums during its 1993-1994 restructuring.

In general, once the F-to-Selling Y fare ratio exceeds 6-7 or the F premium over unrestricted Y fare exceeds 15%, F cabin RASM underperforms Y cabin.

eponymous_coward
Guest

Sorry, I’ve flown AS for years as a Gold. If you think you were getting upgraded on SEA-EWR/DCA on a $99 fare back five years ago, I can confirm for you that it wasn’t going to happen.

Bellesarius
Guest

The consequence has been to seriously erode the value of remaining loyal for Gold/Gold 75+ as free upgrades are almost non existent now on long haul routes. This will have consequences for Alaska’s most loyal business customers as they will likely shift to other carriers where elite status ensures better opportunities for special treatment. Business customers rarely are allowed to pay for 1st class.. try getting a customer to sign off the expenses.. so loyalty programs are key for keeping us in a particular airlines’ seats. I’m seriously considering switching next year away from Alaska to another carrier…

Frank
Guest

+1

This is exactly right. I’m inclined to stick with AS because I like the service and I’m based in SEA, but the fact that it’s so difficult to get upgrades on the routes that would matter to me is causing me to question my logic. I’d say my upgrade success on AS mid-cons and transcons is maybe 40%. On UA, when I choose 757s with larger F cabins, it’s probably 90%+.

David SF eastbay
Member

People who actually pay for first class will like now paying less, but the coach passengers who think it’s their right to pay for coach and sit in first class will not if there are less seats available.

Which means the statement “””””….however, this one isn’t controversial at all.””””””” will be controversial because those that whine they can’t upgrade will make it controversial. They will say how dare an airline try and sell more F seats and keep them from upgrading. Remember ‘whiners’ can always find something to whine about if it doesn’t favor them.

Frank
Guest

I presume this is aimed at me. I’m a whiner? Really? I fly 40K+ miles/year with AS, who explicitly promotes complimentary upgrades to F as a feature for their elites, and I’m whining because those upgrades are, in Bellesarius’ words above, “almost non existent now on long haul routes”? So AS incents people to fly more with them and attain elite status in part to be able to upgrade on any fare, and when this is now difficult or impossible on the routes where it would be most helpful, I’m whining to point this out?

Hunter
Guest

I don’t think you’re whining. It’s understandable to be disappointed when the upgrade isn’t available. But, it is important to remember the perk is not “unlimited upgrades;” it’s “unlimited space available upgrades.” There’s never a guarantee.

Bellesarius
Guest

Not whining either.. but I am beginning to question the logic of maintaining a pretty loyal relationship with AS when I fly 50k+ miles and for two years straight have NEVER been able to use upgrade coupons they give me much less a free upgrade.. to be fair on routes to CA from SEA I get upgraded about 40% the time.. but sadly I rarely travel these.

frank
Guest

Alienate your MOST LOYAL customers with less upgrades OR fill up the cabin with cheaper first class tickets???

Hmmmmmmm, Cranky, call public relations at Alaska and invite them to respond.

Airline Examiner
Guest

I’m going to geek out for a minute here and say that I love your choice of photo because it’s of a 737-200 that never had First Class seating, and is no longer part of the fleet :-)

Jason H
Guest
I marginally understand the stance of Frank, frank (are you different than Frank?), and Bellesarius. I enjoy my upgrades when I get them as well. However, why should an elite flyer’s upgrade outweigh someone willing to pay the F price? Let’s look at some numbers. DEN-SEA random date of 9/14 – Discount $114, Full Flex $335, First $435 I’m not a AS flyer so I’m not versed in what is upgradable and what isn’t, but I think the price is fair and if people are buying first class tickets good for them. You want first class then buy it. And… Read more »
Frank
Guest
I’m the same person. You ask a good question: why should my free upgrade outweigh a non-elite traveler’s paid upgrade? More broadly, what you’re really asking is, why should any airline offer any free upgrades to elites instead of taking whatever marginal dollars they can for those seats from non-elites? And the answer is pretty simple: for most airlines, including AS, they’ve done the math and accumulated the experience to believe that they more than recoup any lost marginal revenue by increasing loyalty among their elites. In other words, better to keep a $20K/year flyer happy than to get $50… Read more »
Jason H
Guest
Frank/frank. Let’s be frank. HAHA! Sorry. I couldn’t resist. I told a woman I knew by the name of Ann once, “Ann, let’s be frank.” She didn’t think it was funny. Oh.. yeah.. Alaska… right. Read on. I hear what you are saying. Really I do. I was Gold with DL and Premiere Exec with UA (though I’m now nothing on everyone). I’m not arguing over $50 one-way. That is indeed silly. However at the same time if a non-elite purchased a $435 o/w DEN-SEA instead of the $114 why should an elite be more deserving of the seat because… Read more »
Fred
Guest

Another thing is that even before first class prices were lowered, first class often sold out on transcons and Hawaii flights anyways. With a relatively small first class cabin and first class award tickets, it would be very hard to get an upgrade on DCA, EWR and Hawaii flights anyways.

Bellesarius
Guest

I have no brook with AS maximizing revenue.. more power to them, it’s their airline and they deserve to do as they please. I’m only saying I have choices to make and I’m going to maximize my opportunities and minimize the inconveniences I have to put up with. At some point if my options are better served elsewhere.. I have colleagues who have similar status and are upgraded 70% of the time on other airlines.. I may consider moving on.

Bellesarius
Guest

FYI my last SEA to DEN fair (early July) was nearly $400 and I wasn’t upgraded to first.. I did have an exit row though which is ok by me.

DesertGhost
Guest
On the surface, it seems better to sell a few seats at lower fares flying them around empty while generating nothing. But I realize there has to be a balance. I know I’ll upgrade if the price is right. I flew Midwest (when it was Midwest) over America West more than once when I could get a more comfortable seat at what I considered to be a reasonable fare. I was willing to pay about 20 to 25% more for the privilege, and I did, more than once. At the time, America West’s fares for a comparable seat were much… Read more »
christophe.bottega
Member

You can count me in as well : i’m, within reason, willing to spend a bit more if it means more perks and comfort !…

SuperDash
Guest
I think AS has done a nice job on FC pricing on the long haul. They don’t have the international biz class passengers like the others do, so they price appropriately. However as a Gold they is no chance in $&@# that I will get a comp upgrade. AS is going to make that harder next year when they limit upgrade to certain fare classes when using the Gold certificate. Does this make me less loyal? Am I entitled to first class? Well I look at it this way. I want my favorite airline to make money. Because if they… Read more »
David SF eastbay
Member

It’s beginning to sound like some people think airlines only have a first/business cabin for people to upgrade into and not for the airlines to sell seats in those cabins.

If that were true, then they wouldn’t publish First and Business class fares now would they.

Frank
Guest
Jason H
Guest

I laughed out loud Frank. Glad others know rhetorical fallacies. Thanks!

Nick Barnard
Member

It’ll be interestring to watch AS work to retrain their passengers.

Although, if they can actually get F to be profitable, do you think they’d expand the number of seats?

BW
Guest

The greedy airlines are trying to increase profits again by nickel and diming us for first class!

But seriously, this is a smart move.

Mike
Guest

I guess because the US has a lot more competitors on similar routes frequent flier privileges need to be better.

May be of interest to some that in Europe, upgrades are not a big part of the package. There is no automatic upgrade given availability at Lufthansa for example.
Even at their highest status (HON) – all you get is 6 upgrade vouchers every 2 years! (only if they oversell economy do they bump people up)

So I understand your guys desire for upgrades but seems like the US airlines are bad at expectation management.

DesertGhost
Guest

“Expectation management” is an area in which Southwest excells (even though it has no first class / business class offering). That’s part of why it has such a good reputation.

robertol
Guest

Brilliant business move by AS. As a UA 1K and AS nobody, I have purchased AS 1st class on last minute trips where the delta between AS F and UA Y was rationalizable (yes, I made that word up). Why risk the UA upgrade lottery on an A319 or A320 when I can have a guaranteed F class seat on AS.

More generally, expecting upgrades, even as a super-elite is a road to disappointment. If an airline can sell their F class seats, more power to them. If they’re reasonably priced, I may well be buying it.

Frank
Guest

robertol, where are you flying that you can’t choose UA 757s instead of A319s/320s, and where AS has an alternative? Short-hauls, I suppose, but for all the midcon and transcon routes where they compete, I believe at least some of the UA flights are 757s.

BG
Guest

I gladly purchased a First Class seat from SEA to DEN on AS in 2009 last minute when it beat the lowest WN fair by $20 (which included a long layover in ABQ). I enjoyed every bit of the experience. Service was top notch and welcoming. AS won a loyal customer in me thanks to that short flight.

Scott
Member

Paid F is a real winner when you’re traveling with AS companion certs from their credit card.

David SF eastbay
Member

For those that said they would now fly other airlines just to upgrade, keep in mind the airlines like to do what everyone else is doing. So if the others see AS is actually selling more F seats they could do the same thing and lower First/Business fares which would bring in more $$$$$ in the long run instead of just upgrading lower cabin travelers. It’s all about making money these days.

Sosai X
Guest

How’s this for an apples-to-apples comparison?
Seattle to Newark, unrestricted First Class fares:

CO: 4x daily nonstops; $1474.00ow
AS: 2x daily nonstops; $749.00ow

At about half the cost of their direct competitor, do you REALLY have to wonder why the First Class cabin sells out and comp upgrades aren’t always available? 

trackback

[…] Discount first class is a mere $159 above discount coach.  Without Executive Platinum status (or with a companion), I would need to spend six 500 mile stickers (at a cost of $30/each if bought outright) and still gamble on the upgrade.  FlyerTalk is in an uproar, but the whole situation feels reminiscent of Alaska Airlines’ approach to pricing first class:  Sell it at a sane price and wind up with more revenues. […]

wpDiscuz