This year’s April Fools post was about Delta creating a version of “Basic Economy” in its higher cabins. At the end, I closed with “I realize this one sounds a little too real and could actually happen, but you can breathe easy for now. This isn’t real… yet.” Well, now it’s real. And I’m actually quite happy about it.
I should be clear: Delta isn’t unbundling its higher cabins… but Emirates is. Emirates has recently introduced its new “Special” fares. What’s so special about them? They are highly restricted, and they don’t come with all the usual perks.
Here’s a chart that Emirates files with Sabre that I think is correct. (Warning: It wasn’t correct originally. I had to update it to properly show upgrade ineligibility, so I’m not 100 percent confident.)
As you can see, while Emirates previously differentiated fares by awarding fewer miles and having different costs to upgrade, it didn’t actually change the product on the day of travel. That is now changing with this new “Special” fare. I’ve highlighted the lines in yellow to see the biggest changes.
- These fares can not be upgraded to First Class using miles
- Travelers will earn the number of miles flown with no bonus, unlike in higher classes
- Travelers are not eligible for the car service between home/hotel and the airport
- There is no lounge access (unless granted via elite status)
- Seats cannot be assigned in advance, only at time of check-in
It’s not reflected here, but change fees are also higher and corporate discounts don’t apply. This truly is the first Basic Business I can remember seeing internationally.
Emirates says these fares “will be offered on certain routes based upon seasonal trends and travel demand.” The handful of markets I checked from the US don’t seem to have them filed yet. But people originating in the Middle East and flying to the US will see them. Let’s walk through an example, flying from Dubai to Seattle on October 10 and returning October 17.
|Special (H class)||$6,383.53|
|Saver (O class)||$6,927.53|
|Flex (I class)||$7,472.53|
|Flex Plus (C/J class)||$8,561.53|
From a mechanics perspective, Emirates separates these all by fare class with the new “H” bucket holding Special fares, “O” for Saver, “I” for Flex, and “C” and “J” for Flex Plus. While there was minor differentiation before, I’d imagine most people were simply buying the cheapest fare that was made available. If the Saver was there, I assume most people bought it. Maybe some needed a fully refundable fare, but that had to be a small percentage. People just paid for the cheapest thing offered since the product was nearly identical. But this new Special fare is a whole different story. There is now a significant difference between the Special fare and all the others, so Emirates has to be hoping for significant buy-up.
With benefits being cut, are fares actually going down? Yes. The lowest fare in the Dubai-Seattle market before this fare was filed on June 10 was $6,818.53. So that old Saver fare has gone up a bit, but the new Special fare is lower than the old lowest fare. I see the same trend in other markets. This makes business class more affordable (or, you know, as affordable as a $6,000+ ticket can be).
Why is Emirates doing this? I’m sure there are a few reasons, but this has to be an effort to increase revenues to help improve the airline’s financial situation. Sure, there is a cost-cutting component as well, but other than the car service, the rest of these things don’t cost much. This is about creating fences to encourage people to buy up.
Undoubtedly Emirates thinks most of its current Business passengers value the lounge, the car service, a seat assignment, and the miles so they will keep buying up. The goal must be to create a lower pricepoint that will help attract new passengers. It will also allow the airline to remain more price-competitive with other airlines that are offering cheap business class fares. I should point out that this does appear to be in Middle East to China markets as well as the US. And Chinese airlines are known to discount heavily.
Why do I like this? Because I generally don’t care about all the fluff. In fact, I wish it would go a step further and allow you to save even more money by opting out of meals — or opting into the coach meals — instead. For me, the big benefit of Business class is the seat. The rest I don’t care much about. So give me that option for less money, and I’ll be happy. The full service option will always be there for those who care.
This has worked in the coach cabin, and it’s likely to work in the premium cabin as well. Emirates took a big step, and now it’s just a matter of time until others follow.
Ugh. Just ugh. At some point we just reach choice overload. Just like we don’t need dozens of versons of each brand of toothpaste, we don’t need so so many choices in buying tickets. It just becomes overwhelming for the many consumers who fly once or twice a year. Then they buy one thing thinking they’re getting something else and inevitably have a bad experience. They end up taking it out on the airline employees and the other passengers around them.
I couldn’t agree more. Take away the fluff fancy meals and drinks and give us a much lower price for the one thing we want most from business class – the lie flat seat. How about a much lower no fluff award price option as well?
100 bucks off. That’s how much i would be willing to pay for a great business class meal.
But it doesn’t bring the fare down enough.
For Emirates specifically I think this makes sense, although perhaps with a slightly higher price gap. Many of their aircraft have very large business class sections which may be difficult to fill depending on the route and season, and this could give them more flexibility when they need to put a premium-heavy aircraft on a route that doesn’t normally support it.
For people to buy it, however, the price probably will need to be a bit lower still (assuming with high change fees or restrictions), as the ~$600 or 8% difference doesn’t seem like it will be enough to convince people who wouldn’t normally pay for business class to do so.
I flew on Emirates business about 6 weeks ago from IAD. My company paid for it, but even if I were paying myself, it would have been worth the extra $500ish to buy the unrestricted fare, if the fare is going to be $6k anyway. The “lounge” at IAD is the Etihad lounge which is not a great loss. But, in Dubai the “lounge” is the whole second floor of the airport; it was dark and quiet; there was a nice assortment of healthy food choices and juices as well as a coffee shop dedicated to the lounge (i.e. free). You had direct access to board the plane. I chose a K seat both legs (A or K are the seats to get on an A380) and I used the chauffeur service as well as the hotel stay (req. a 6 hour Dubai layover in Business, 8+ in economy). It will be interesting to see if they restrict the hotel stay as well.
The good seats filled up fast. There are a lot of people who travel regularly so if you can’t select your seat in advance, expect to be in one of the middle two seats next to a stranger. My feeling is, in for a penny, in for a pound – if your company is paying, but the non-restricted fare. Even if you’re paying – you’re already $5,000 in. It’s worth the 8% extra to have all the amenities. Which is I’m sure what the number crunchers at Emirates decided too.
While I agree that main driver for the busn class is the seat I still think the delta between regular economy and the stripped down business fares is too much to get your regular econ. passengers to buy up – and isn’t that the entire point of this all? Anyone who flies corporate that covers the business seat doesn’t give a rip about the savings unless the company lets them pocket the difference. The leisure or business traveler that’s in the back of the bus is who you are courting. My gut tells me the markup needs to be less than 100% of the standard coach fare to get them to jump. Not sure if the economics pencil out to have that big seat at anything under a 100% markup as then it kills your margin on the premium pax. Just put in less business class seats if you’re having trouble filling them…or cut back on the amenities for that class across the board and lower the fare for all. This whole plan is just unnecessary complexity.
Unbundling business class seats says that Emirates can’t get the price for the seat that they should be. A lot of airlines, including Emirates, added large business and first class cabins. Multiple airlines have done the same thing; the premium cabin market is not growing near as fast as the coach cabin. Lie flat seats take up the space of up to 5-6 coach seats. Cutting the size of the business and first class cabins is what is needed – but airlines can’t do that overnight.
The answer to offering a lower priced product that offers more comfort at a price that many leisure passengers will buy up to is premium economy cabins. US airlines were slow in offering premium economy products but AA, DL and UA all say they are getting handsome premiums over standard economy fares but premium economy seats take up only slightly more space than a standard economy seat.
Incrementally more expensive cabin products with more enhancements likely delivers better financial returns that discounting a premium cabin product.
Yet interestingly, I see a lot of criticism of American’s smaller premium cabins (vis a vis other U.S. carriers) on airline blogs. I tend to believe those who actually run airlines have a lot more revenue and cost data and a lot more in-depth analysis than does the general public, in spite of the large amount that’s public record.
… and that criticism is likely from those that want upgrades.
I doubt there are many passengers who are willing to pay full business class fares that cannot find a seat.
Bloggers (and frequent travelers) like when supply outpaces demand as it usually leads to operational upgrades, award availability, easy use of upgrade certificates, etc. When premium cabins shrink, more seats are sold, which makes getting that “outsized value” for points / miles / loyalty harder to find. Today, I still think many premium cabins are too big on a marginal cost/benefit case. But if they shrunk cabins overnight, there would be a frequent flier revolt. Though we do see it — look at every US carrier reconfiguring planes — adding more seats overall and reducing Premium seats while trying to condition fliers to think extra legroom is an upgrade not just a seat attribute.
Delta is pretty clear in their investor calls about how much premium cabin revenue they get and their goals of the cabin to have paid load factors in the same range as coach paid load factors. As a diamond, I don’t like that since my company will only pay for coach, and that is a loyalty perk, but I understand from their business perspective why they do it. And I can’t remember the last trip, domestic or international, where there has been no reasonable availability (not necessarily pricing) of premium cabin options.
I for one am hugely supportive of the concept of “Basic J” far more than “Basic Y”. I assign nearly all the value of J to the flat bed personally and just about none to fluff like lounge, meals, and crew service. EK, for once, is leading the world in the right direction.
Basic Y is making a bad product much worse. Basic J is removing administrative overhead to give us just the flat bed we ask for. Sounds like a winner to me.
I agree. Basic Y is a non-starter to me. I don’t want to be in a crappy middle seat at the back of the plane. I’m not a student who is happy to find a place on the plane anymore.
But, Basic J means I still have a comfortable flat bed in the front of the plane. If there was no ffod, I could buy something before my flight at home that is better than the meals served in J (which are hit or miss IMO). I’d totally do that.
I wonder which bucket redemption seats will book into. They’ve removed the free car service from reward seats in the UK – perhaps they’ll remove lounge access too?
There’s also the speculation that they are going to introduce Y+ soon, which would be the natural step for people moving up from Y, so I cant’ see that this is designed to attract current Y flyers.
“The goal must be to create a lower pricepoint that will help attract new passengers.”
Except if that’s really the goal, the pricing is way out of wack. I can’t think of anyone in the market for a coach or even premium economy ticket that’s now going to be interested in buying up to business class because it’s now “only” $6,300. That just doesn’t fit my budget any better than $6,800, and I’d imagine most potential customers are the same way. If that’s really EK’s goal here, then they need to go whole hog and strip out all the usual J benefits, and offer just the seat for, say, a $1,000 upgrade charge over the normal Y fare. That would be innovative, and I might even go for that.
As it stands, let’s call a spade what it is – this is a cost-cutting “enhancement” that’s just going to p*ss people off when they fork over $6,000 for a plane ticket and then find out they don’t even get lounge access. And you can bet Delta’s figuring out a way to copy this as we speak…
the problem with your theory is that business class seats take up a whole lot more real estate on the aircraft than economy seats so the discount has to reflect the revenue opportunity.
No, Delta will not likely be unbundling its business class fares like this because they understand that if you can’t get the fares you need from premium cabins, then you reduce the size of them and add products that people will buy. That is exactly why AA and DL both have reduced the size of their business class cabins and added premium economy and also have economy plus (extra legroom standard economy) seats in addition to standard economy.
It might be an idea for Delta and AA to have flights with this type of product for places that are less popular for J seats (i.e. non-business destinations) and places that have low J demand during certain seasons. It might be a way to fill seats that would go empty otherwise.
MeanMeosh – Remember, this just started, so it could be the source of a lot of experimentation on pricepoints.
any insight into how this might work with corporate business?
I could see a few hypotheses –
1) this helps differentiate business and leisure passengers in the J product, which would allow for better price targeting.
2) Companies who don’t offer J begin to offer at lower price point
3) Companies who offer J, restrict employees to the lower class to save 10%, which could be significant and shift a lot of business from other carriers to Emirates.
noahkimmel – I think it all really depends on where pricing settles. But the idea would certainly be to protect the existing corp business. Big companies that have corp deals may end up paying less since corp discounts don’t apply to the new fare but do to the old one. I assume Emirates must have figured out what matters most to the current biz travelers through research. Now if they can find a way to get the price low enough to be attractive to more cost-conscious businesses, then that would be a gold mine. But it’s hard to thread that needle. And the prices currently are still really high so I don’t know how much it shifts.
It may just be more about trying to shift from other airlines with competitive products.
This is just nuts, relative to any class of service you may be talking about. Come up with a basic service, price it, and offer a million options to that basic service, but don’t allow the options, and their prices to affect what is and must be seen as the basic service price.
Someday, somehow, airline prices will be based on the single fare at the millisecond service is offered to the consumer and he or she accepts the offer. The basic fare will entitle the consumer to (1) transportation, (2) from airport of origin to final destination airport, (3) in an airplane (having air to breathe and a facility to handle bodily function needs), (4) with crew to fly the aircraft, (5) with additional crew, as the airline, or DOT may deem to be necessary to ensure passenger safety, (6) in a particular cabin, (7) in a seat.
Everything else beyond that would be at the customer’s request or the airline’s decision to require it, with or without additional charges, as stipulated upfront, in a common, ordinary price list. The basic fare, once agreed to, at the time of offer and acceptance, would be the one and only fare chargeable. Of course, from one millisecond to the next, that basic fare could change dramatically, as would be expected in any free market. But, no add-on service should in any way affect the basic fare.
This is nothing more than the extension of our domestic airlines’ “Basic-Economy” vs. regular “Economy” pricing farce. This is unfair; this is misleading; this is deceptive. This must be stopped!
I could not agree more – I would love to purchase the real estate, e.g. the space, only.
I am guessing that the people who end up in cheapo business class are people on massively discounted tickets such as airline and cruise employees, people who get a fantastic deal on an airfare linked to a cruise, and perhaps people on award tickets. They are probably not people looking for a few hundred bucks off a several thousand dollar ticket.
There was a picture of 2+3+2 business class seating on flyertalk.com. So the people getting cheapo tickets end up in the middle seat, give up lounge access and the chauffeur. If there is decent seat pitch and some privacy dividers, the middle seat may not be too bad.
It’s an interesting development and further unbundling would definitely be welcome. Car service never bothered me and no lounge access is just another excuse to turn up to the airport as late as possible.
The seat assignment bit is the one thing I quibble with. I’m tall and the seats nearer the aisle on emirates’ a380 have a significantly bed than those further from it, to the extent that I’d pay to avoid it, however on the 777 I’d be fine with any seat to save money.
If I’m flying Emirates, it’s two long haul flights connecting in Dubai. Taking lounge access (and seat allocation) out is a dealbreaker, or at least requires a much bigger discount than $600 (10%). You can prise my mid-trip shower from my cold, dead (jet lagged) hands!
I like the concept overall. I too think that the overall comfort of the seat is the prime thing I’m willing to pay extra for, especially on a long trip. I can put up with almost anything for an hour or two, but for an eight to 15-hour trip. I’m more than happy to pay for comfort. Items like food, drinks and entertainment are secondary.
I’ve been in corporate travel for many years. This will be a nonstarter for a huge part of that market. Refundable with a seat assignment is pretty much mandatory for high corporate level travelers. It isn’t uncommon to switch flights if the seat assignments don’t match the travelers profile. Even companies that have stricter corporate travel policies aren’t going to want to sit on a very expensive nonrefundable ticket value for somebody that may not be with the firm in six months. Even if the airline offers name changes as part of their corporate contract it will be a tough sell. Premium economy is the future for price sensitive travelers as it gives comparatively good comfort at the fraction the cost of business class. That was what business class was. Today’s Business class is the equivalent of First from years ago. They call it business class to satisfy corporate travel policies.
Forgot one other point. Many companies have corporate discounts that are cheaper than the discounted J fares that avoid the messiness of these new fare buckets.