Legacy Airlines Missed a Golden Opportunity to Get People to Like the A La Carte Model, But They Blew It

Over the last decade, the definition of “coach” has changed a great deal in the US. Seats have become closer together and ancillary fees have sprung up where they never existed before. Unsurprisingly, this has pissed off a lot of people. While I’m a believer in the a la carte model that has evolved, I’m also a firm believer that the airlines have screwed up its implementation at every turn. Had there been anyone with long term vision at the airlines, this would have been done in a much more customer-friendly way.

Proposed Cabin Naming

The most important thing I can convey here is that I think the hard and soft product that’s offered today is fine. Yes, there is still an evolution going on and improvements can (and should) be made as a normal part of doing business. But I’m not writing to suggest that any massive overhaul is needed. This is about how the product is marketed and presented to the traveling public. Think about how things have gone over the last 15 years and then imagine how they could have gone differently.

Looking Back and Shaking My Head
The airlines sort of stumbled into this idea of charging for ancillary services. Think back to the late 1990s when airlines were trying to best each other. United created Economy Plus with extra legroom, but it wouldn’t actually sell it. It was more of a perk for elite members and those who bought the highest fares. American, meanwhile, thought it best to try to just put extra legroom in the entire coach cabin. Talk about a bad idea. What American didn’t realize is that different people want different things. Some will pay more for legroom, but not all will. Giving the choice is what matters.

Soon after this rollout, the industry tanked and the airlines took turns in bankruptcy. Over the first decade of the 2000s, amenities included in the coach fare went out the window. Free meals disappeared in favor of buy-on-board food. A fee for checking a second bag was added. Then as oil peaked in 2008, a fee for the first checked bag was added as well. Free snacks were removed. US Airways even tried to sell soda, though that was a step too far. It backed off.

While this was going on, United finally came to the realization that it could actually sell Economy Plus seating to everyone. This was a big success, but when the Continental merger occurred, the arrogant group from Houston didn’t believe it. It took multiple efforts before the Continental folks finally realized it was a good plan. It continues to be a huge success. Of course, United wasn’t the only one to see this, and just about everyone else in the US has caught on. We have Delta with Comfort+, American with Main Cabin Extra, JetBlue with Even More Space, and Alaska recently announced its own extra legroom product.

Once extra legroom options were added, that allowed airlines to further cut the traditional coach product down to size. They didn’t have to worry about angering the elites who would sit in the extra legroom section, and those penny-pinchers in the back would be fine with less room if it meant keeping fares down. Slimline seats meant more seats could be added to airplanes without hugely impacting legroom. (Some were certainly way better than others.) Galleys and lavs were shrunk down too. In a game of pennies, reducing unit costs was key.

The extra legroom sections continued to thrive. Some airlines (Delta) added free entertainment, snacks, and drinks as the section became more differentiated. But in the cheap seats, the airlines found they weren’t cheap enough. Delta in particular felt it needed something to compete with the ultra low cost carriers, so it introduced Basic Economy. The seat was the same, but these tickets were highly restricted. They were meant for only the most price-sensitive of travelers. American and United have both shown interest in doing the same.

So it was that we had this new “basic” economy at the low end, regular economy just above, and then the extra legroom section above that. In the traveler’s eyes, coach was coach but it was worse than it used to be. (Yes we’ve seen snacks added back… little improvements.) Extra legroom sections were an upsell. That is not how this should have gone.

How This Should Have Gone
Think about the product offering Delta has built now. Comfort+ looks a lot like coach used to look, just with a couple more inches of legroom. No, it doesn’t have exactly the same amenities, but the point is clear. If someone cares about the experience more than just price, Delta has that option available. For those who really care about price more than anything, there are other options available. And this is where the airlines screwed up. They took what was coach and degraded it, then reintroducing those features as upsells.

Instead what should have happened is along these lines. I wasn’t sure the best way to explain it, so I went with a VH-1 Behind the Music kind of thing.

Unicorn Airlines realized early-on that people liked its coach product, but it wasn’t what everyone wanted. There was a larger group out there that really cared about price more than anything, and Unicorn’s costs weren’t low enough to compete. Understanding the different motivations, Unicorn set out to create distinct offerings that would appeal to both types of people. Unicorn maintained its quality coach product and even added a couple extra inches of legroom to make it best-in-class. Those caring about having a good experience at a fair price were thrilled. For those who cared about price above all, however, Unicorn introduced Value Class.

To create Value Class, Unicorn stripped down the coach product and kept only the basics; a way to get somewhere safely and with as little cash outlay as possible. The back half of the airplane, formerly coach, was remade to Value Class standards. New “slimline” seats were introduced to allow Unicorn to put more people in that space. Yes, these seats were less comfortable than before, but the fare reduction made it a worthwhile trade-off for those who needed the price to be as low as possible.

To get fares down even further, non-essential items were pulled out of the base fare and charged as separate add-ons. That included pillows and blankets, snacks, meals, and even checked bags.

That would have been enough to satisfy many of the low fare-seekers, but Unicorn went even further. Though the physical onboard product remained the same, Unicorn rolled out Super Value fares to be even lower. Those fares stripped out things that were more core to the product. If anyone wanted seat assignments or carry-on bags, an extra fee had to be paid. Change fees were double the standard amount. This product was so barebones that it allowed Unicorn to sell tickets to a whole group of people who wouldn’t be able to afford them otherwise.

You can see how this would have gone better. Coach could have gotten better while new classes were created to create a lower level of onboard product. People can understand that and would accept it. Remember how fares tanked in the mid-2000s as the economy imploded? That would have been perfect timing. Coach fares could have stayed higher, but in Value Class, fares would have dropped.

Why This Didn’t Happen
There are, of course, several reasons why this didn’t happen. Most importantly, airlines effectively stumbled into this way of doing business. They just kept hacking over the last decade or more, trying to find a sustainable business strategy as the red ink flowed. They went bankrupt trying, but eventually they got to a decent place with a business model that worked. They pissed off a whole lot of people along the way, but it didn’t have to go like that. If anyone actually had a true vision of the end state, then this could have been done so much better.

It’s taken a long time, but we’re finally getting to a place where this alternate development strategy starts to converge with the hack method that was employed. Still, mistakes continue to be made. When Delta decided to go through a cabin rebranding last year, it blew its chance to simply make Comfort+ into coach. Everything else could have been Value Class, or something with a more suitable name.

Maybe this transformation isn’t done yet, and we’ll see an airline employ this kind of strategy… but probably not. Hindsight is 20/20, but it’s always tough to look back and see how things went wrong when it didn’t have to be that way.

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39 Comments on "Legacy Airlines Missed a Golden Opportunity to Get People to Like the A La Carte Model, But They Blew It"

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christophe.bottega
Member

I’m not as optimistic that it wouldn’t happen again !… in part because airlines are tied by corporate contracts dictating which classes they can sell to big corporate customers

And maybe one of the most compelling reason is the incapacity to pull a switch and implement immediately a standardized product across a whole fleet !.. So today, coach has different meanings depending on the metal, the operator, international and/or domestic, … And I don’t even start to consider codeshares where an airline sells you a coach seat that might have nothing to do with what it is doing !…

Nick Barnard
Member

I wonder if the airlines have figured out what the costs to do a “manhattan style” project and ground 10-20% of the fleet at a time to refit everything into a standard product. Given that we haven’t seen it happen yet, I figure its too high, but its an interesting idea to think about.

A
Guest
I honestly think the advent of online travel agents created a race to the bottom in coach. It wasn’t that long ago when you had to visit a real live travel agent, say in person “I want to go from X to Y” and rely on them to give you options and prices. With things like Priceline and Orbitz and all the others everyone was cross shopping airlines and fares to death. Thus UA might miss that fare to AA for something like $10 even though AA’s seat pitch was better, etc. How many blog posts have talked about “delivery”… Read more »
A
Guest

Should say “AA missed the fare to UA” you get the point.

noahkimmel
Member

“Then you have a lot of corporate travel policies that dictate “lowest available fare.” The only saving grace then is if you have status and can get an upgrade”

Sadly, Basic Economy s starting to really screw with us corporate travelers as the upgrade isn’t as big of a concern as not even getting SkyPesos

BigDaddyJ
Member

Exactly this. Cranky, I think your essay makes sense, but if you don’t talk about the fare aggregator dynamic, you’re missing a huge point.

For example, if Delta were to improve Economy and introduce Value, on Expedia/Orbitz/Travelocity Delta would merely look more expensive and they would lose business. I don’t see how this could have been remotely doable from a fare perspective.

Dan
Guest

Brett,

I sort of get what you’re saying, but to me, this kind of branding only works if the first fare your show me is the “enhanced” product fare, an then “value” class gets discounted from that.

If the first fare advertised is the heavily discounted no frills fare, I’m just going to get pissed off after I add on all the fees to get to the product I want. OTOH, I feel good about “saving” money.

So perhaps one of the biggest problems of the fee era is that the OTA’s have been slow to keep up, making product differentiation difficult.

MeanMeosh
Guest
The problem with the idea of “Value Class” is, as A and Noah Kimmel have pointed out, is the requirement of a substantial number of employer travel policies to purchase the “lowest available fare”. Sure, as a leisure traveler just looking for a good deal, I might be willing to put up with a middle seat in the back to save a few bucks. But DL’s Basic Economy, as an example, also disallows most Medallion benefits, and I doubt very many business travelers will be happy about foregoing assigned seats, preferred seating, complimentary upgrades, etc. just so their employer can… Read more »
sfcarl
Member
The legacy airlines recognized at some point that customers wanted lower fares. However, lower fares is all that customers wanted. The legacy airlines imagined everything else. When did you ever hear customers say that they wanted the opportunity to pay to rent blankets on board? When did you hear customers say that they wanted the opportunity to pay for the food that the airline provided on board? When did you hear customers say that they wanted the opportunity to pay to get an advance seat reservation? When did you ever hear customers say that they wanted the opportunity to pay… Read more »
JoEllen
Guest

Perfectly said. I just love it when the airlines BLAME the customer for “wanting” these amenities….or “we’re hearing what YOU want”, etc. I’ve stood at a ticket counter for over 30 years and nobody has ever said (as you mention) that they wanted to pay for x, y, z as an extra. The airlines have convoluted everything. Maybe if they just kept it simple – F class, Y class and provide basic amenities like snacks and blankets (period), they’d have passengers banging down their doors to get on.

Dan
Guest

The problem is that what customers SAY, and what customers DO, are two very different things. Spirit is pretty damned successful precisely for giving passengers a rock bottom fare and charging for everything else.

Nick Barnard
Member

Passengers didn’t say they wanted fewer amenities, they said they wanted a cheaper flight. So airlines figured out how to give them that, part of which was stripping out all those little costs, and charging the folks that wanted those little perks for the perks..

Gary
Member
With a daughter who lives and works in France, flying long distances regularly is a norm for us. Also, since we are “senior citizens” having the ability to obtain extras of anything on flights is important. I do find it puzzling how the airline industry seems to be peopled by folks who don’t have very much imagination, or common sense for that matter. I strive to maintain some level of elite status with American Air (the primary carrier I use) in order to have access to whatever few amenities that one can obtain but they are harder and harder to… Read more »
Scott
Member
The race to the bottom was touched on by the internet, sorting everything by price. Unfortunately airlines have been unable to brand themselves in the way that hotels do. In the hotel world everyone knows a Hilton is better than a Motel 6; but in the airline world, no one seems to care; and I think this will change. The big change will be when one airline has the balls to say “Yes we charge more, but we’re worth it”. American kinda half-assed tried that with “More legroom throughout coach” and Southwest do the “Bags fly free”; but they really… Read more »
Nick Barnard
Member

I think the biggest problem here is there is no 3 star vs 5 star differentiation. If you wander over the internet, there is some story where every major airline sucked, and some story where every major airline was great. Theres a bit more differentiation on long haul flights, but lay-customers see the product as one monolithic thing.

Scott
Member

Exactly my point. The airlines have done little to differentiate themselves.

In the hotel business, everyone knows a Hilton is better than a Super 8; despite the fact you can find good and bad reviews for both. The airlines need to do something to differentiate themsellves

Nick Barnard
Member

True, but the thing is the airlines are attempting to be a reverse mullet. They want to have Super 8 in the back and Hilton on the front. (or if your VX you’re trying to be a W hotel.)

Alex B.
Guest
The hotel comparison is interesting, particularly for business travel. It’s not hard for corporate travel offices to differniate between airlines. I don’t fly a lot for work, but Spirit and Allegiant aren’t getting tons of business travel. It’s a lot trickier when a single airline is offering those different products on one plane, however. It’s not that hard to make the case that a business traveler shouldn’t have to stay in that Motel 6 and instead go for the Marriott. But when the Motel 6 and the Marriott products are both offered under the ‘Delta’ brand, and both on the… Read more »
Scott
Member
Oddly, the thing that is killing them is branding their stuff with the same name. Air Canada are close, with having “Air Canada Rouge” and Air Canada, but people aren’t smart enough to distinguish, so they’ll tar (or priase the other way around) AC after flying ACR not realizing they’re separate things. Codesharing also sounds like an awesome deal at first to the airlines, but in a lot of ways hurts the airlines more. If they want their brand to be premium, they can’t slap their brand on something that isn’t. Without code sharing there’s still nothing stopping them selling… Read more »
Nick Barnard
Member

AFAIK, didn’t Republic try this with Midwest and Frontier?

Frontier was the value brand and Midwest was the luxury brand..

Though the problem ended up being that they were both operated by the same airplanes. I remember there was one instance where a plane came in as a F9 flight and left as a YX flight. The joke was it must really suck being the paint crew at that airport.

jaybru
Member
I doubt that there is anyone around who understands and can write about all of this better than you can. Many of your commenters are pretty good, too. (I wish Alfred Kahn were still around to opine about all of this, but…!) Anyway, a skeptic of much of what comes from this industry, I take note that you mention airlines could have done things “in a more customer-friendly way.” I simply do not find much about this industry being “customer-friendly.” The industry has wonderfully professional and courteous employees who to me do try to be customer-friendly, but the corporate entities… Read more »
Jim
Guest

The problem with calling coach class “value” is that it will scare people away from booking. Without knowing the exact details, people will book “coach” class on airline A rather than “value” class on airline B, not knowing that they are the exact same thing.

Nick Barnard
Member

You could probably call it Hades class and people would still buy it, since it’d be the cheapest.

kolb
Member

No, No, NO. I keep trying to unsubscribe and it doesn’t work.

kelty
Member
No, we haven’t hit bottom yet. During WW II, the Bee Line bus company on Long Island, NY. could not buy new vbusses because of wartime restrictions. So, they invented the “sit-stand.” It was a molded piece of plywood you ccould lean against so they could carry more passengers. Don’t tell the airlines about this. We traveled across the the continent this summer in first class on frequent flyer miles. It reminded me of what coach used to be like on “Ocean-to-Ocean” service. Adequate leg room, a small piece of chicken, and a glass of wine. Our latest trip was… Read more »
Nick Barnard
Member

Oh no need to keep the sit-stand quiet from the airlines.. They (or rather seat manufacturers) have already gotten to that: http://www.cnn.com/2014/07/10/travel/standing-cabin-plane-study/

grichard
Guest

This bewilders me. Why would one more name change for various products miraculously change consumers’ outlooks?

ABC
Guest
Sounds great in theory, and in theory I totally agree. From a marketing perspective and customer expectations perspective it makes total sense. Trying to implement it during the mid-2000s though… good luck on convincing a ton of investment in IT and retraining customer service staff when oil is $140 and your airline is bleeding. Aviation is an industry that by nature can’t change that quickly. The money lost in the 2000s had to be stopped, and the fastest way to stop that was to get coach passengers to pay something closer to the actual cost of their travel. Bag fees.… Read more »
Oluver
Guest

Pretty sure I paid for Economy Plus in the very early 2000s. But I think it was only available as an annual subscription at the time former those who didn’t have status (I soon acquired Silver status and never had topped at again).

southbay flier
Guest

I always figured that the airline fees that came from 2008 were so haphazardly planned, that they created their own mess and it took them another 7+ years to figure that our.

At least Delta doesn’t use coach any more. It’s Main Cabin after Comfort+.

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