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

Fares, Seats

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

  1. 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 !…

    1. 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.

  2. 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” through a website which was a near non-issue when only professionals were booking tickets???

    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, but when traveling mid-week there aren’t enough leisure travelers to fill the back and many of the bread & butter road warriors get delegated to the cheap seats.

    Regardless of how it was rolled out or what they call it I’m on enough planes every year to know when service is cut. Inevitably I’ll be on that morning flight to ATL and get delegated to seat 36B because everyone in front of me has XXX more miles than I do. Do I care that my employer spent $25 less on the ticket? Nope. Do I dislike traveling more, absolutely.

    1. “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

    2. 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.

    3. A – I agree completely that online travel agents are a problem, but that shouldn’t prevent this from being put into effect. The obvious solution in my mind is to have online travel agents continue to show the lowest available fare regardless of class. This would require no programming work to be done other than to change it to say Value instead of Coach, or some other minor stuff. And yes, that shrinking population that continues to buy through online travel agents will end up getting what is called coach today when they book. There’s no way around that until the online agents get their acts together.

      But then everyone booking directly or through brick and mortar agents will get the benefit of the new structure. It’s still a big step forward for the majority of travelers.

  3. 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.

    1. Dan – The point is that you show these differently. So if you’re on airline.com, you’ll see an option for Coach or for Value. If you choose Value, then you would have a bunch of add-ons. If you chose Coach, you wouldn’t. It’s just a matter of how it’s positioned.

      Yes, OTAs make this hard, but they will continue to be marginalized. At least those who don’t book through OTAs will have a better experience.

  4. 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 save a few bucks. IMHO, a better way of doing it would be to display whatever the standard economy fare is, and then allow the customer to remove frills in exchange for a “credit” against the fare. Or they need to permit elites to enjoy the same perks as regular Economy.

    I think the other problem with the transition to the a la carte model was that the airlines claimed at the time that items such as baggage fees and fuel surcharges were necessary because of the spike in jet fuel prices in the mid-oughts. Naturally, when oil came back down and the fees didn’t go away, people were p*ssed, because they felt lied to. Oil/fuel should never have been used as a justification to introduce fees.

    1. MeanMeosh – That’s an issue for the businesses. If the businesses want to operate at the lowest travel cost possible and deny their travelers from having elite benefits, that’s up to the business to decide. Or it’s up to the business to negotiate into the contract. But that’s not what I’m really suggesting here anyway. Value Class would still have those benefits. It’s just the Super Value fares that wouldn’t. And the issue for the business is the same as it is today.

  5. 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 more to have a decent, healthy amount of legroom on board, the same amount of legroom that used to be standard?
    You heard customers make those requests only in the airlines’ fantasy worlds, yet those unheard, unwanted requests are exactly what the airlines gave their customers. The airlines deserve every bit of customers’ antipathy toward them. The airlines earned it.

    1. 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.

    2. 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.

    3. 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..

    4. sfcarl – Nick and Dan have it right. A huge percentage of travelers want lower fares. They vote with their wallets. If you ask a traveler if they want to rent a blanket, of course they say no. But if you show them two different fares, they’ll pick the lower one. I’m guessing you do the exact same thing.

  6. 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 come by. Seems to me a wise carrier would actually make an effort to build in some type of resource to hear from their customers…I mean an institutionalized entity, not just random comment opportunities…to see learn what actually might be a win/win for us all. Ah, but of course that makes too much sense..common sense, not business sense.

    May I raise another issue recently encountered: having a flight cancelled due to mechanical/maintenance issues requiring an overnight hotel stay and then having the so-called “customer service” entity deny any need to reimburse etc. because they claimed the flight was cancelled due to weather (of course the one condition that allows them to opt out of any recompense). This happened to me just after the Thanksgiving holiday and it was bizarre since in spite of what I experienced etc. the airline (yes AA) stuck to their guns that it was weather. In fairness, finally supervisor (of course NOT in “Customer Relations” confirmed for me that the record did actually show mechanical etc. and issued me an e-certificate, but “Customer Relations” never once acknowledged that the flight was delayed multiple times and then finally cancelled due to a maintenance/mechanical issue. Very bizarre.

  7. 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 need someone to say “Stop flying 3 star airlines when you can fly 5 star, we really are worth it”. Corporate travel will then start looking at airlines in the same way they look at hotels; where you’re allowed to book an “at least 3* hotel”

    In the past you’d have a travel-agent who would say “Of course you want to fly Ward Air, it’s only $50 more to London, but way better than Air Canada”; with the travel agent mostly gone, the days of this value add service is gone. These days all that matters is making sure your flight [base] is at the top of the list when your sort by price on the internet.

    1. 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.

      1. 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

        1. 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.)

    2. 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 same flight, differntiation is a lot harder.

      Part of that is on corporate travel departments adjusting their policies, but the airlines could help differentiate those products as well.

      1. 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 a ticket with Skywest & United, but slapping the [premium] United name on a short-haul so-so Skywest flight ends up hurting them more in the end. You can only be as good as your weakest link; as the vast majority of the flying public really have no idea who Skywest is, they just lump it in with UA.

        Plenty of companies have multiple brands, but rarely would they ever do something like slap their premium name on a lower brand and just use small type (actually made by ..)

        1. 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.

    3. CZBB – The problem with this is the high fixed costs of this industry. (Stay with me…) Because of the high fixed costs, airlines need to operate flights frequently to get high utilization from their capital investments. So while the corporate travelers might like a 3 star or better airline during the week, what does the airline do on the weekend? And how do those airlines serve pure leisure destinations like in the Caribbean? Seasonality is hugely different too.

      With these assets, the airlines have to be able to cater to everyone. The pure hotel brand thing just doesn’t work in the airline industry (or hasn’t yet). The way to do it is to create various brands on the same airplane. The airlines are finally starting to figure this out, but they’re still not branding them right.

  8. 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 are all about ensuring complexity, manipulation, and deception, which disadvantage customers.

    They say “knowledge is power,” as with customers’ ability to deal with airlines on price and service. Of course, customers have an obligation to exercise due diligence. But with how the airlines can market and present prices (use an asterisk or a star here and there, which clears up nothing) and service with such great complexity (often disguised as good ol’ ala carte), say the word “transparency” but call things that are anything but transparent (“direct” flights, for example), and issue those legal masterpieces called contracts of carriage, customers having powerful knowledge is nigh impossible.

    Sure, there is DOT, but read a typical regulation and you can see who “really” wrote it (the prefaces are great, but the regulation itself is little more than an airline’s cover and you never know how long the DOT consumer protection office will survive our Congress!

    I, as one customer, will keep fighting for transparency and fairness, keep writing to DOT to make airlines do this and stop doing that, but the odds of individual customers really being able to get the type of transparency and fairness that is needed is not good.

    Thank you Southwest, JetBlue, Virgin, and Alaska (sorry Spirit, Frontier, and Allegiant, but I do have my limits) but don’t turn your back…!

    Anyway, another year to kick around this stuff. Thanks Cranky, for offering up your comments and hoping for more in 2016.

  9. 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.

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

    2. Jim – I’m not trying to tell airlines what they should call it. I’m simply proposing the idea for how the branding should go directionally. You can call it whatever you want; just don’t call it coach. I think you’ll find people will book Value Class like crazy if the price is right. As Nick said, you can call it anything.

  10. 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 by car.

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

  12. 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. Charging for food. Degrade the product because differentiating it would take too long to implement.

    Now the money is available to invest to implement the proper marketing differentiation.
    Though I am still curious whether you would consider “Value Class” to be a different cabin than Economy.

    1. ABC – I don’t think you necessarily need to have it as a true separate cabin. This is all about marketing. The traditional definition of a cabin just doesn’t really matter if you package everything correctly.

      1. Sorry, was referring more to the official industry definitions of cabin which have been ingrained for 50+ years, which so many business processes are tied to. Not to putting up a curtain between sections on the plane. Interline settlement, fare construction, etc.

        The definition of an airline product has evolved to be far more complex than what certain parts of the end to end infrastructure can support.

  13. 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).

  14. 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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