You Know, He Has A Point….
I totally missed this. I was at the American Airlines Media Day recently and got to hear a bunch of the executives talk about what they see for the future. It was an informative (if not transformative) day of information.
I was standing right beside Gary when he had this conversation with the head of loyalty, Bridget Blaise-Shamai. And, I totally missed the nuance.
Bridget positioned the upgrade discussion around the fact that members aren’t earning less upgrades. They ‘re just clearing the upgrade list closer to departure.
Gary brings up the point that the statement means American likely didn’t earn any extra revenue by holding seats longer. Now, it’s still possible AA earned more money from people buying up to First Class. It’s a hard question to answer without access to the data.
First Class used to be really expensive. Airlines used a formula that charged a heavy premium for those seats, banking on a small subset of customers who would always pay the premium. The new model charges significantly less for those upgrades. We assume that means the airlines make the same or more money on the first class cabin. Hard to be certain, especially when some airlines have shrunk the premium cabin on certain planes.
The Final Two Pennies
Put simply, American Airlines is making customers wait longer for upgrades. They’re not alone. Delta and United have adopted similar philosophies. Does that convince some customers to buy-up, so they can secure that First Class seat? Or, does it just make elite members mad without the prospect of additional revenue?
What do you think?
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One bit of nuance to what I inferred from the conversation. What we know is that if the same number of seats are going for upgrade as before, then the number of seats being sold hasn’t gone up. If they had, there wouldn’t be as many left for upgrades.
What we don’t know is the price that American is selling those paid seats for. Year-over-year the buy up amount seems higher on many though not all flights. They could be making more money on paid first sales. We know the number of seats being sold is the same, but not whether the average price is higher or lower.
Gary, agree on seat numbers. Can’t say I have enough AA flights this year to know if YOY pricing is up or down. This year vs 5 years ago surely feels down.
Yes way down compared to ‘the past’ — airlines used to sell F in a couple of buckets. There was full fare, maybe a discount fare. Now they file fares where F is a fixed buy up from whatever the cheapest fare available is. Two years ago I was buying DCA-DFW-AUS for an extra $180 in F. Now it’s more, but hasn’t come close to reverting to the ‘old days’. They’ve just figured out price points a bit better for what people [not necessarily me, but people] will pay.