Alaska Takes a Stab at the Subscription Economy with California Flight Pass

Alaska Airlines

Alex Corey, Alaska’s MD of Revenue Products & Strategy, told me yesterday that the airline had been developing the idea of entering the subscription game for years — they were just looking for the right time and opportunity. About a year ago they began working with Caravelo on a firm plan, and yesterday all that hard work became public with the rollout of the Flight Pass and Flight Pass Pro.

The over-arching idea was to create something that would play into the never-ending appetite for subscriptions. Alex rattled off all sorts of numbers, including that subscriptions would reach $1.5 trillion by 2025 and there is a growing trend of “power subscribers” who have more than 10 subscriptions at a time. With the pandemic trends of people being able to work from anywhere along with wanting “safe exploration” and nearby vacations, Alaska figured it had finally found its opportunity.

First, Alaska had to define a target market, so it could build the right product. Initially that was the price-sensitive traveler who liked the idea of having an “incredibly low fixed price” that would allow them to plan their travels out for a full year. A college student going home (or on spring break) was an obvious example of someone with regular travel needs and a low budget. That defines the Flight Pass market.

The Flight Pass Pro, however, was more about flexibility than price. Small businesses that wanted to set their travel budgets firmly were a perfect opportunity. And so, the team went to work on crafting a product.

Alaska turned to California as the right geography. Again shooting off stats, Alex noted that there are 3.5 times more people traveling within California than any other state. The airline’s network in California is thick with short-haul flying, but that wasn’t quite enough. Phoenix, Las Vegas, and Reno were thrown into the mix to make sure there was enough variety to attract travelers. Here’s the map.

Image via Alaska Airlines

California made sense logistically, but also in my mind, this was a play to take a bigger chunk of what is a highly competitive market that Alaska can’t win. Southwest is the 800 lb gorilla within California, and the addition of Fresno, Palm Springs, and Santa Barbara during the pandemic has only solidified that further. Alaska does have some unique markets, like Santa Rosa and San Luis Obispo, but intra-California is a market Southwest refuses to lose. By creating a subscription product, Alaska was able to come up with something that Southwest likely won’t be able to match — quick tech development is, shall we say kindly, not its strong suit. Beyond that, it should give Alaska a nice little marketing bump.

For those with starry-eyed memories of the old JetBlue All You Can Jet pass, this couldn’t be more different. That was a flat fee for a month of travel. This is a flattish fee for a set number of trips. It’s clear that Alaska architected this very intricately.

Flight Passes come in two flavors. The Flight Pass requires booking travel more than 14 days in advance of departure. The Flight Pass Pro allows you to book same day. The Flight Pass is about price, so it starts at $49 a month while the Flight Pass Pro is about flexibility, so it starts at $199 a month. All plans require a full 12-month commitment.

These come in three denominations. You can buy 6, 12 or 24 roundtrips in a year. And yes, all of these have to be booked as roundtrips. No one-ways allowed.

When a travel uses a Flight Pass, taxes and fees are still on the traveler. Since these are all domestic, that means every traveler will pay the September 11 Security Fee of $5.60, the segment fee of $4.50, and unless there’s an airport that doesn’t charge it, the passenger facility charge of $4.50.

Further, each ticket comes with a minimum fare of $0.01. Alex said it made it a lot easier for them to have an actual fare, but he didn’t get into details. The pass books into a “middle upper fare bucket,” but I couldn’t get any hard details about what that bucket is. I was told, however, that it can vary. And if that bucket isn’t available? Travelers will still be able to book that flight at a discounted rate, but one that is higher than a penny.

I did a little digging on my own on the microsite and looked at LA to San Francisco tomorrow. Based on the selling fares, it looks like this books into M class. If only K, H, or B are available then it’s an extra $100. If only Y is available, it’s $200 more. On the other hand, Santa Rosa appears to book in H, and only B or Y would have premiums. I didn’t check to see if this varies by date or just by route.

But let’s assume that you never run into that problem and you can always book an available flight. Is it worth it? Well, here’s the math provided by Alaska.

This is not a bad deal. Sure, you can sometimes pay less than $127 for a roundtrip, but it all depends on where you’re flying. If you do Vegas in the middle of the week, this is probably a bad deal. But if you do Santa Rosa? Winner, winner, chicken dinner.

The reality though is that this isn’t about gaming and trying to figure out what’s the way to save the most money. This idea is about simplicity and consistency. It makes it easy for someone to budget for travel, and that’s why people like subscriptions in the first place.

Of course, it requires someone who plans to regularly travel on the routes the airline has, and I imagine that will create some interesting geographical differences. For example, it’s a much more robust network if you live on the peninsula in between San Francisco and San Jose than, say, if you live in Orange County. I hope I can coax Alaska to share geographic data down the line.

As far as the airline is concerned, this is a “long-term, ongoing product,” so this isn’t just a test. Could it make it into another market? Alex says it’s possible, but California is pretty unique with its network and with Alaska’s need to juice the business there.

37 comments on “Alaska Takes a Stab at the Subscription Economy with California Flight Pass

  1. This is similar to when one buys a 10-trip bus or train ticket, but in aviation terms & as noted these are round trips not one way trips.

    Off topic, a YouTube channel called “Company man” did the “rise, fall & rise again” of Delta Air Lines yesterday. Thought everyone would be interested.

    1. I haven’t seen that video, but I’m familiar with the channel. He does some interesting breakdowns on the histories of companies and what went right/wrong.

      There are similar channels that cover infrastructure & aviation disasters, but that’s another rabbit hole and even more off topic, so I’ll leave it at that.

  2. Interesting concept. The devil will be in the details, but I can definitely see the value in the regular subscription for college students or grandparents, and in the pro subscription for small business travelers.

    I imagine that if subscribers (especially the “Pro” level) have to frequently pay $200 upcharges to get on the flights they want, there will be a lot of public gnashing of teeth, so I assume that Alaska will watch that metric closely and toss subscribers a few sweeteners if they complain about paying $100/$200 upcharges on most trips.

    It would be nice (especially for the highest tier or two of the “Pro” level) if Alaska guaranteed a “max total upcharge”, where after the customer paid $x in upcharges over the course of the subscription, Alaska would cover most/all of any additional upcharges. At this point in time, however, any guarantee like that would probably only serve to complicate the program and bring attention to the potential risk in it, and that proviso would only benefit a small proportion of customers anyway.

    Any idea how the FF status/miles will work with this? It will be interesting how much longer-term loyalty Alaska is able to drive with this subscription, and if it’s able to get travelers to stick with it for future flights (and/or subscription renewals) instead of returning to other airlines like WN.

      1. Ah, thanks, Brett.

        I never fly Alaska and don’t bother with miles/FF points (don’t travel enough to make make it worth the headache and identity theft risk), so I appreciate the information.

    1. That’s because Alaska only serves Seattle and Portland from those two airports, not any destinations in California, Vegas, etc.

  3. So … let’s sum up :
    you basically commit to a monthly fee for a year, without even knowing if the airline schedule will still fly your intended route(s) conveniently for you for the whole period, probably can’t even travel the first month of your subscription if you subscribe to the lowest tier as you only get half a trip credit,
    And if you’re a college student, probably only have a 2 terms (8/9 months) visibility into where you’ll be !
    What is probably great from an airline point of view (fixed revenue wether the customer fly or not) might not be that great from a customer one !…

    1. Not to mention that it’s only for round trips.
      That takes out a lot of business travelers.

      This seems pretty useless to me.

    2. No, no, you don’t get a half credit per month. You commit to paying for 12 months, but you get the credits up front. So you can book right away (with a 14 day advance purchased on the lower pass). That was just an illustrative calculation.

      1. Alaska’s terms and conditions (PDF: https://alaska.caravelo.com/alaska-flightpass-terms.pdf) say the credits are deposited monthly or bimonthly, not that you get them up front. They also say the credits expire, but I cannot see anywhere that says how long until they expire. That’s a pretty key detail.

        You must *book*, not fly, before the credits expire. You can book 90 days in advance; if you cancel a flight after the credit expired but before the travel date, the credit is forfeit.

          1. It depends a *lot* what the expiry timeline is, and the fact that they apparently won’t tell you before purchasing the product makes me worried. If it’s 30 days, hugely restrictive; if it’s 180 or 360 days, no big deal. They also say that you can choose to receive your first credit when you purchase the package or wait until the first of the month, but that the expiry period will be longer if you wait. That suggests a fairly short expiry.

            You probably have a better shot than most of us to figure out what the expiry is! ;)

            1. Oh wow, worst case scenario. So you never have multiple credits at a time? That is a huge killer.

          2. Agreed. Given that it’s a mandatory 12-month subscription, I had assumed that people get the credits up front. The fact that the credits are not issued up front (and assuming that there is no way to get them all at once by “pre-paying” the full 12 months of the subscription upfront) definitely hurts the value proposition for this.

            Then again, if all the credits were available up front but the subscription was only billed monthly, some less scrupulous people might be able to use disposable (or soon-to-expire) CC numbers to pay for the subscription and flights in month 1, then not pay for the subscription at all in the subsequent months, and make Alaska go after them for payment for the bulk of the subscription costs… Not sure how realistic that would be (and I don’t WANT to know, to be honest), but I’m sure a small number of people would try something like that.

            1. If you got all the credits upfront upon payment of the first subscription payment, how would this be different from buying X flights and paying in installments? Subscriptions generally deliver their benefits in recurring intervals and charge for each delivery period.

              But yes, it makes the whole deal less flexible and desirable. Then again, I don’t live in CA anymore and so it’s all hypotension anyway.

    3. The closest comparison to what Alaska is trying to do with this is probably the monthly pass products sold by many public transit agencies. That model works because many people can generally predict a month in advance the minimum number of trips they’ll need, the per-ride base cost for that number of trips, and can be reasonably confident that the transit service will be the most cost-effective way to make those trips. This model encourages additional transit trips because it zeroes out the marginal cost (to the pass-holder) of each additional transit trip: once you’ve bought a monthly pass to cover your commute costs, you can use that same pass to get to the ballgame on a Sunday afternoon at no additional cost, so you might as well use it.

      What Alaska is proposing carries all the disadvantages of a transit pass: higher upfront costs, locking oneself into a single service provider. It also provides none of the benefits of a transit pass: even for the small number of people who can predict that they will fly regularly, it does not allow them to know in advance the base per-flight cost, nor does it assure them that Alaska will be the most cost-effective way to make that trip, nor does it zero out the marginal cost of each additional trip for the pass-holder. It’s not even really an unlimited pass, as the number of trips it allows per month is capped at a low number, making it not particularly useful for, say, someone who commutes weekly between LA and SF.

      The most compelling use case for this is business travelers, who fly frequently within California, but not too frequently, and don’t do much traveling outside of the areas covered by this product. That’s a pretty narrow niche.

  4. Do you think this will catch on with other airlines, as a way to create lock-in (beyond loyalty programs) and to create a more predictable recurring revenue stream?

    I need to work on reducing my subscriptions; really don’t want to be considered a “power subscriber”.

  5. I believe Eastern had a similar product for the Air-Shuttle back in the day, but I also think that was spurred by the competition with Amtrak’s Metroliner service on the southern half (NYC-DC) of the Northeast Corridor.

    1. I was going to ask about the potential for B6/DL/AA to offer a similar program in the opposite corner of the country.

      Unless you’re north of the Boston ‘burbs or south of the DC ‘burbs, I-95 is rarely a fun drive, and often not even then.

  6. The fact there counting my round-trips and not one-ways makes this flight pass feel really confusing, in public transit the standard for multi-ride discount tickets (like 10 trip tickets) is 10 one-way trips, almost no transit agencies sell these as round-trips.

    Any word if their definition of a round-trip includes open-jaws to two different airports in the same geographic area, like specifically around Los Angeles like could I book a trip flying into Burbank and out of LAX, Ontario, or SNA?

    My theoretical example is I live in Santa Rosa and need to go to an evening event in Hollywood on Friday, March 11 wanting to spend one night.

    Burbank is my preferred airport to reach Hollywood and their is a non-stop from Santa Rosa to Burbank on Friday Afternoon (1:40pm to 3:03pm)
    Alaska doesn’t fly the route from Santa Rosa to Burbank of Saturdays (there website offers some flights connecting in Seattle or Portland that I assume won’t be flight pass eligible), but does have a nicely timed (for my theoretical schedule) flight from LAX leaving at Noon (which is fine since Saturday morning traffic from Hollywood to LAX should be better than right at 3:00pm on a Friday).

    I believe since the flight pass is restricted to booking round-trips I couldn’t use one of my credits for this relatively simple (in terms of geography) open-jaw itinerary.

  7. Looking at this map has me realizing that perhaps AS could find a niche in connecting a NoCal city like Eureka or Redding to the Bay Area or Southern California – using Horizon regional aircraft. That region appears to be a hole in their west coast map.

  8. Neat idea–it’ll be interesting to see how it does! Will this support through-ticketing? Say, Sonoma County to LAX to Las Vegas, and back. I know you could do it as two separate round trips (STS-LAX and LAX-LAS), but can you book on a single ticket with the 1-cent rates, so it includes baggage-transfer and can be rescheduled as a whole trip if needed? Seems like it’s not really necessary in the current product, but if they were ever to try a subscription with the PDX or SEA hubs, they’d almost certainly require through-ticketing options.

  9. This seems like the latest gimmick to steal some California market share from Southwest. Alaska had already reduced some of the California service it added after the Virgin America acquisition. Years ago, “Shuttle by United” failed. Southwest’s response to the previous Alaska incursion was to drop a tsunami of seats into Hawaii from California, many on overlapping routes with Alaska. And then, as noted, Southwest opened PSP, FAT, and SBA. I wonder how many Rapid Rewards sign-ups Southwest picked-up with the Hawaii service? It seems to me the only state Southwest won’t fight harder for than California is Texas. But kudos to Alaska for creativity: it will be considered a success if revenues increase more than the cost of running the program. I wonder if they will consider a similar strategy on their intra-Alaska routes? Since they have a virtual monopoly on that, it’s doubtful. It would be interesting to see Southwest go into Alaska, albeit into the larger markets. Competition is good, right?

    1. Are we sure this isn’t a play to just entice a merger with WN sooner I have been hearing that is on the table we will see though.

  10. I agree with the skepticism about the details. Feels like there’s a disconnect between the identified target market and the fine print. College kids / young professionals do a lot of one-ways, adventure travel, willing to trek to alternate airports, extremely price sensitive, spur of the moment travel, etc. Forcing round trips (especially from the same airport), only offering a limited slice of the network, and not removing the potential of having to pay more if the right alphabet soup fare class isn’t available will kill this program, in my opinion.

    I think they’d be better off offering a higher priced subscription that comes with true flexibility / less fine print. Hope that if/when this fails, someone else will try it with more flexibility.

    I also think they’re overthinking the short term economics of it. Its ok to take a little bit of a loss on a bunch of kids going to spring break if they’re winning them away from ULCCs and building loyalty among the business travelers of the future.

  11. This seems a little desperate and a little genius.

    There is the position of weakness that this is obviously a strategy to fill seats.

    However the biggest gain is trying to get people to look at Alaskair.com first, away from looking at the online ticket sellers or, even worse, going directly to southwest.com.

    I’d argue this mirrors what now is a highly successful subscription program: Amazon Prime. On its face, Amazon Prime as initially implemented, is a crazy idea, we’ll give you as much two day shipping as you want for a single flat fee. However the one really important thing is for Prime subscribers, it made Amazon the first place they looked for items, and made people more likely to just purchase, instead of stop and try to get to the free minimum shipping amount and just decide to purchase and move on.

    Alaska gets the benefit of people just going to Alaskaair.com and not to Google Flights or Expedia or whatever. There also is the requirement that you book tickets frequently and promptly, so it keeps encouraging people to fly. Additionally, its still subject to capacity controls, and there may be an extra fare required on a popular day.

    Its still a gamble, but its an experiment that is worth trying, and has been tried by a few other non-US airlines.

  12. It feels like a way to gin up business in an area where they are weak with the former VX routes. It feels like that purchase was a mistake.

  13. For those of us in San Diego, this is an easy call. Eight cities in California are part of the package with high frequencies to SFO, SMF, and SJC included. I travel to at least one of these eight cities once/month. Most of my meetings are project-driven and scheduled at least two weeks in advance, so that is not an issue. Upon joining the program, I immediately booked a flight to STS saving nearly $350 for a round trip in main cabin. As a Gold, I have since been upgraded to First Class each way.

    I just can’t get this comprehensive level of features (including a brand new lounge at SFO) for intra-California travel on Southwest (which I still fly and enjoy) nor on United (which I fly less and enjoy less).

    Sorry this program doesn’t appear to work for some of you, but for me, it’s great…

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