October 08, 2009 - Airlines in recent weeks continued to introduce new value-add options for travelers willing to pay extra. The trend of unbundling (and in some cases rebundling) service and product attributes is providing carriers with crucial incremental revenue, pushing distributors to develop an efficient means of selling such options and challenging corporate travel managers to track and manage the extra charges.
The latest offers include United Airlines' packages of perks that include priority security and boarding, more legroom, two checked bags and bonus frequent flyer mileage. Priced between $47 and $167 each way, United's Premier Travel package can save customers "up to 50 percent compared to buying these benefits individually," according to the carrier. Ranging from $84 to $298, Premier Travel Plus includes access to United's airport lounges. The service options--available "in limited quantities" for "most itineraries departing from the majority of U.S. airports" United serves--can be purchased online when booking or checking in. United's airport kiosks will offer the options "later in 2009."
United this week unveiled the 13th item in its Travel Options portfolio: Its Premier Baggage subscription allows customers to pay $249 to check two bags every time they fly during a 12-month period. United said the annual fee "pays for itself after just a few trips" and "covers the standard checked baggage charge for up to eight companions traveling under the same confirmation number."
Unlike some other airlines, United "made the conscious decision not to go down the path of fare bundles," said distribution director Kathleen Bennett, speaking last month at The Beat
Live in Austin, Texas. "We really want to be able to customize the travel experience and travel enhancements that are important to the customer and let them determine what they want to pay for rather than [having a] predetermination that everyone who pays this fare is going to get an aisle seat or a window seat or check a bag for free."
Meanwhile, Southwest Airlines customers now can pay $10 for priority boarding. Those purchasing that option will board before general check-in but after customers holding Business Select tickets or qualifying in the top level of the carrier's loyalty program.
For international travelers, British Airways starting this week is allowing customers to select seat assignments at the point of sale, with fees varying depending on type of seat selected and fare purchased.
Officials from the two U.S. carriers said there were no immediate plans to bring the new options to travel agencies and corporate booking tools.
"As we continue to evaluate its effectiveness, we may open it up to additional channels," said Southwest corporate sales director Rob Brown, regarding the carrier's Early Bird priority boarding offer. Right now, it is available just through the Southwest Web site or at the airport upon check-in.
At United, "in the ideal state, we would like everyone to come to united.com, book what they want, purchase what they want and keep it all in house," Bennett said. "We are evaluating the uptake of the packaged services, but in order to bundle products together, you need to know who the traveler is before you can offer it to them and there are challenges when you are dealing through external channels to know up front the characteristics or the identities of the individual travelers."
Managed Travel Challenges
From a travel manager's perspective, many of the
difficulties encountered last year as the unbundling trend began to take hold remain today.
For example, WellPoint manager of travel strategic sourcing Cindy Heston wants corporate online booking tools to "bundle that all back together so we can see at the point of sale exactly what our costs are." The "really difficult" thing, she said during The Beat
Live, is enabling those tools to recognize the frequent flyer status of a traveler and therefore determine whether a checked bag fee will be charged. [Most airlines have exempted high-level loyalty program members from some fees.]
Sabre Holdings chairman and CEO Sam Gilliland told Heston that global distribution systems and the booking tools they support eventually would show total airfare prices that include various add-ons. "What corporate buyers are saying is that 'if it happens the way it has been described, I don't like it, so let's figure out a way for it to work better,' " he said. "It is going to take some time, and there are going to be some frustrating days before it gets better."
Meanwhile, travel buyers continue to clamor for more thorough reporting on credit card statements that detail every airline charge. Oracle Corp. corporate travel buyer Rita Visser said United has "made inroads," but other carriers have not. "Maybe I am glad to pay $150 [in extra fees]," she said. "I just want to know what it is for."
Continental Airlines senior vice president of worldwide sales Dave Hilfman acknowledged that "it's taking a long time to work through this process--far more complex than we thought it would be." He also said Continental, in cooperation with credit card companies, in the coming "weeks" would have the ability to provide descriptions of charges on credit card statements.
GDS Developments
As industry groups, airlines and other players in the distribution chain work toward standardizing how unbundled airline product and service attributes can be sold at various points of sale beyond airline direct Web sites, the three primary global distribution system operators are building systems now to allow airlines to drive ancillary revenue through travel agency channels.
Sabre already has implemented an upsell product for United Airlines, a capability for Midwest Airlines to differentiate and sell its premium class and branded faring capabilities for Qantas and Porter Airlines. Sabre Travel Network senior vice president Chris Kroeger said Sabre "in parallel" is working on broad solutions for the market, as well as one-off tools for individual airlines "to address their needs immediately."
Travelport is developing an "Options Integrator" that will "hook into the airline's system and when a travel agent is booking a particular flight it will pop up" and ask that agent if they want to input checked bag or seat selection," said Travelport Americas vice president Travis Christ. "It knows the customer profile and what they are eligible for. We have that ready to go today. We are waiting for the technology on the airline side, in many cases, to be able to plug into that. When the timing comes together, we'll be ready to turn those things on."
Amadeus IT Group vice president of marketing and distribution Ian Wheeler said his company is building "a service catalogue," allowing airlines to decide which unbundled items or add-ons they would like to list. That catalogue would be used by airlines to provide various options at all points of sale, including the travel agency channel "from the first half of next year."
