A couple weeks ago, Frontier announced that it would reduce benefits for those who book flights through third parties. Reaction was all over the map with some saying it was great and others saying it was terrible. In my mind, this is a very clever move though it doesn’t come without risk.
Those who have booked travel on Frontier’s website know that for every itinerary, there are three fare categories – Economy, Classic, and Classic Plus. I’ve written about this bundling strategy and how I like it before, but there is a problem. You can’t see these packages anywhere but on FlyFrontier.com.
Travel agents can manually sell the higher packaged fares but it’s a pain. The bigger issue, however, is that online travel agents simply don’t show the option at all. As always, those sites are designed to just show the cheapest possible fare and that’s it.
But of course, people use these sites, and Frontier wants to still be a part of them. So it came up with a very creative solution to the problem at hand.
Damaging Full Content Agreements
Many airlines have been forced to make deals with the devil. In this case, the “devil” is third party global distribution systems (GDSs). In the early days of the internet, airlines started to offer web-only fares and the GDSs started to panic. If they couldn’t push the lowest fares to people, then they would start losing relevance. So they came up with a plan that is today often called a “Full Content Agreement.”
In these agreements, the GDSs agree to charge lower rates to the airlines in exchange for an agreement to get access to every fare (excluding things like corporate discounts, of course) for distribution to the public. The airlines signed on because the reduction in fees made it worthwhile, but the GDSs have used this as a way to hold airlines hostage.
While airline websites continue to evolve and show different ways to sell air travel, the GDSs stick to the same old tired price-and-schedule display that really does a great disservice to travelers who are increasingly looking for better value and not just cheap fares.
Getting Out of the Chains
These agreements hamstring airlines, but what Frontier has done is looked at ways around them. Now, you will get the same cheap fare whether you book on FlyFrontier.com or on any third party site as required, but what you get for that fare will change. If you book through a third party site, you won’t get a seat assignment until check in, you will only earn half the frequent flier miles, and fees including change fees are higher. For example, change fees on lowest fares are $50 if booked at FlyFrontier.com but $100 through other channels.
This means Frontier can honor the Full Content Agreement while still finding a way to push people to book directly, where the airline can save almost $25 per ticket on a simple roundtrip connecting domestic itinerary. Clever, right?
The Risks Involved
But what’s the risk here? Well, in their usual fashion, third party sites don’t disclose much beyond price and schedule. It’s useless for doing an actual comparison. I went to Travelocity to try to book a ticket on Frontier and it didn’t tell me any of this stuff. All it said on the seat selection screen was “Seat Selection Unavailable. Contact the airline to request your seats.” Right, but when you call the airline, you will be told you can’t do it. (At least Orbitz shows a seat map that shows all seats as being “priority” and not for basic assignment.) And nobody said anything about earning reduced frequent flier miles.
The risk is that there will be customer service issues for those who find that they aren’t getting some of these benefits they could have had if they booked directly. Those people might be mad when they find they can’t reserve a seat in advance. But for Frontier, an airline that is really pushing forward as an ultra low cost carrier, this is a necessary change. It can’t keep paying the incredibly high GDS fees, but it also can’t afford to just turn that spigot off immediately. Instead, it can use this plan to encourage people to book directly, slowly shrinking the number of people who don’t.
There will be an impact with corporate travel agents as well here especially since they rely on their GDSs for client reports. But there is away to book directly at FlyFrontier.com and designate the travel arranger. So that blunts the impact a bit. It will still be a concern.
In the near term, this could result in a spike in complaints, but I don’t see a better way to do it. They can’t charge more on third party sites, so this plan is the best option out there when it comes to reducing dependence on those very expensive distribution options.
27 comments on “Frontier’s Clever But Risky Move to Encourage People to Book Direct”
I am surprised still so many people booking through 3rd party systems, honestly…
What about corporate travel that *must* be booked through a corporate travel agent? Even if I’m stranded and need to book a flight our policy is to have the corporate travel agent book the flight.
For example if I’ve got a meeting in Denver I’ll have my admin check flights and times. I’ll get the usual options of United, Delta, Frontier, etc. Corporate policy dictates that I book through our agent, of which initial bookings are almost exclusively done online today, but Frontier locks them out of upgrade packages and I miss 50% of my mileage. For kicks I checked flights to DEN through our agent and Frontier shows only one fare option.
Since there is plenty of competition on that route I’ll take my business to DL or UA. I get why Frontier wants to do this but I still think it’s short sighted. Sure, I can book online through Frontier and then submit my expenses back to my employer but that’s a pain for me, accounting would be mad, and why we use the corporate travel agent in the first place. I’d have to be a big Frontier fanboy to do that.
I think the standard airline answer to that is they want the TMCs (corporate agencies) to direct connect to the airline’s own API to get full content, ancilliaries and bundles. In practice I think this means only largest TMCs will connect to largest airlines – at least for the first few years – but then it is a percentages game, if 90% of their business traffic is from AMEX, CWT, HRG and one or two other big players they might not care about the rest. And this is not necessarily in the TMC’s best interest either, they get a share of the segment fee in some cases.
I’m not saying I necessarily agree with all this, I’m neither an airline nor an agent, but many airlines will continue to seek ways to cut the GDS out of the picture. Even airlines that still want to do some agent or OTA distribution want a cheaper way to do it.
Isn’t this what AA is doing with Direct Connect?
Delta has also lately reduced the number of smaller players in the GDS field.
Until we get new GDS systems that take into account ancillaries and value comparison, we have to deal with what we got.
A – You have to remember what Frontier is doing here. Frontier is going to an ultra low cost carrier model where an increasing number of routes are operated a couple times a week. This airline is moving away from the corporate market more and more.
But you can be sure that if it has good corporate deals, I have no doubt it can make special provisions in the direct agreement with that company to do away with all the restrictions.
On meta-search sites like Kayak, SkyScanner, etc. you can price compare and still book direct on Frontier. I just did a quick test to confirm and deep link from Kayak to booking.flyfrontier.com showed me the flight selection page with all the bundles. BUT kayak is still just price comparison, it shows you can get same fares on Flyfrontier, Orbitz, etc. but doesn’t indicate that one booking channel has better value than another. I suppose that might change.
Worth noting that airlines have to pay meta-search for traffic, sometimes this can get expensive also – I believe in some markets for some carriers it is at level of GDS segment fees already.
A related point – Frontier might have got lucky with the terms in their FCA, but other airlines might have more restrictive contracts (or a broader definition of “content”) that would prevent them from doing similar.
Mark – Are you really hearing about metasearch deals that cost airlines as much as booking through the GDS? That would be unreal if those engines could get that kind of power and it would really surprise me.
I should clarify – if you are a new(ish) carrier in a market dominated by one or two large meta-search providers, your combined budget for traffic acquisition (meta-search CPC/CPA and google adwords) is starting to approach that of GDS segment fee. If you include the cost of search in high look to book environments (200:1 or more), it starts to get punitive unless your PSS contract is very generous. I have two accounts of that in two different markets but I can’t quote either due to confidentiality. Of course if you are big enough with enough leverage and traffic direct to your brand you can afford to push back – e.g. LCCs actively choke them off. But the same is true for GDS segment fees. Sorry I can’t be more precise.
Thanks for clarifying. It’s amazing to me that metasearch sites have achieved that kind of power at this point. Of course, the look to book doesn’t matter if you’re going through a third party like ITA, right? Then you’re not hitting your system.
Someone has to pay ITA or Vayant or Everbread (and occasionally GDSs offer search only – but it is usually slower and more expensive) on either of two models: (1) per search or (2) per booking with a look to book limit. So in the case of Kayak’s (somewhat strained) relationship with ITA (now Google) that would have to come out of the CPA/CPC revenue. Of course you can put a cache on top of the search provider if your traffic is very very high, but look to book continues to matter somewhere in the value chain. It certainly is better if it can be managed on newer technology.
Having people complain who use online 3rd party sites is a big plus for Frontier to ‘train’ people to only use their site. The more people that complain the better.
When those people call Frontier to complain they can honestly say it’s because the traveler booked on a 3rd party online site and not Frontier.com. Excellent way to get people to only go to their site instead of 3rd party online sites.
Frontier is sitting back and hoping they get a lot of complaints from those who booked 3rd party sites since they will have a simple way of dealing with it by just saying use Frontier.com next time.
e.g. Frontier is trying to train their customers like WN has trained their customers.
Isn’t there also a risk that a GDS will sue Frontier for breach of contract? If two fares have the same price but different conditions are they actually the same fare? I’d argue not. Unless the contract language says otherwise, it seems to me that the GDS’s could make a case that Frontier is not fulfilling the full content requirement.
Dan – Sure, the GDSs could sue for breach of contract, but you have to assume that Frontier did its homework. Considering GDSs don’t differentiate anything except for price and schedule, this looks like a full content agreement to me. Granted, I’d imagine the GDS lawyers are rewriting the contracts for the next time the renewal process comes around.
And didn’t Continental do something similar with 50% EQM for flights not booked directly with them?
I like the OTAs because they give me discounted flight/hotel or flight/car bundles and because I can get a 5% rebate on my purchase price through one of the affiliate portals. Unless I flew Frontier very frequently, that is more valuable to me than the extra frequent flier miles and advance seat assignment.
The GDSs also allow you to combine multible airlines on one ticket… Some will have to choose between checking their bags to their destination (and earning 5% cash back, as mentioned above) vs. seat assignments and higher fees.
The GDSs can only combine onto one ticket the airlines which have interline agreements and connections filed for the relevant route. A GDS will let a TA or OTA book any two different tickets in one booking, but the passenger doesn’t have interline assurance in the case of misconnect. It is one weakness in older airline IBEs (and PSS/Res systems) that they don’t support selling their interline partners flights, but that is gradually being addressed. Several carrier webpages now sell flights from all interline partners (though sometimes this requires a code share).
Also, I don’t think that Frontier is really going for customers that would want or need multiple airlines on one ticket. I think very few of their customers would be interline passengers from international flights or destinations they don’t serve, so there isn’t much need for it in this case.
F9 has a somewhat limited domestic network and even more limited schedule. It often makes sense to fly F9 to DEN, MCO, or even ANC and interline there. It?s an option I have used a few times. If F9 abandons third party sites they would lose out on the revenue from interline trips. While it?s probably a small amount it is probably big enough to not be insignificant.
I recently noticed that Orbitz and Expedia are charging a booking fee for multi-carrier itineraries, with outbound on one carrier and return on another. When did this start? I have an upcoming trip where the best flights were outbound on Delta, return on Alaska, but on flights which neither carrier was willing to sell on the other. I thought it would be convenient to have these in one itinerary, but then I noticed that both Orbitz and Expedia charge a booking fee of about $7 per person (three people are traveling). Since the fares were also bookable as one-way, I ended up just booking as two separate itineraries on the respective airlines’ web sites. Come to think of it, I could have also saved the fee by booking separate itineraries on Orbitz or Expedia, since these would be considered fee-free single-carrier itineraries (the irony…)
Anyway, what’s the deal here? I see that the online travel agents are trying to charge for some perceived added value, though other than saving a few clicks in the booking process, I fail to see how putting the flights on a single ticket justifies an extra $7 per person.
Because they can. For a while the OTA sites were all charging booking fees, then airlines started advertising that booking direct meant no booking fees, and the OTAs responded by removing booking fees from single-carrier trips so that they’d be charging the same price. But they kept the fees on interline trips since the airlines don’t typically offer those themselves.
“Because they can” — except, they can’t. I didn’t buy from them.
I can see value in selling me a product that I can’t get anywhere else, for example combining two fare legs that require a round-trip purchase. This might be worth $7 and even more — in theory, travel agents should be able to extract almost the full price difference between their unique itinerary and the best trip I can construct on my own using airline web sites. But a trip that is essentially two one-way fares? I don’t see the added value.
There might still be some minimal value in change fees and such, though even that I’m not sure about. Generally on legacies, change fees apply to a whole itinerary rather than a single direction, so if for example you cancel your entire trip, you retain more of the value if it’s in a single booking rather than two. However, I don’t know how the change policies apply to a mixed itinerary with two carriers, and I admit I didn’t bother checking, because I wouldn’t pay extra for a marginally better change policy — my plans for the upcoming trip are rather firm, and in this situation I believe it’s more economical in the long run to get the most restrictive tickets, risking a big fee in the rare event your plans change.
Ron – That is how it works with change fees. Tickets involving multiple airlines are ticketed on a single carrier, usually the dominant carrier on the itinerary. Any changes technically go through that airline and are done at the highest change fee on the record. (It’s settled up between airlines behind the scenes through a mechanism that’s been there for years.)
Thanks, Cranky, it’s good to know how it works. In my case, the Delta change fee is $150 and for Alaska it’s $75, so the change fee for a single itinerary would be $150; if I cancel the whole trip, a single ticket would save me $75 (per person). I feel it’s not worth the extra $7 charged by Orbitz and Expedia, since I estimate the chance of having to cancel at less than 9%.
(This is not even taking into account the fact that the booking fee is cash while the potential savings are in airline credit, or that if I just need a change on the Alaska leg then I’m actually better off with separate tickets — but this is even less likely than canceling the whole trip.)
So, a travel agent with no risk is making $25 per ticket, while those greedy pilots would get a pay raise if they made $1 per hour per passenger.
I like this idea, think the unions would agree? The ultimate in pilot compensation. Pilots get paid per pax/per hour. What should be the rate, $2? So a 737 pilot with 130 people on board for 2 hours would get $520 for the flight. Not bad at all. A 777 pilot would get $3 hour and with 300 for 7 can clear $6300 for the flight. Oh, but those redeyes with 20 people would be awful. 5 hours, 20 people, $200. Would completely tie a cost to the revenue which has been a problem in the past. Suddenly, service (on-time, friendly, etc) would matter as people pay the salaries. Who am I kidding, will never happen. But imagine a world where it did…