I recently ranted about how people get what they pay for when it comes to air travel, but I feel that I have a few more things to say. I have come realize that there is downgrading trend going on in the industry that needs to change. Let me explain.
What if you get to a situation where increasing volumetric efficiency becomes done for reasons other than combating cost? After all, a business is in business in order to make a profit. It’d be irresponsible to not seek greater margins, right? Especially when passengers are already prepared to accept pain in economy class.
What’s sparked my continued rant is that I am starting to worry that European-style business class may be getting a foothold in North America.
For those of you who do not know, European-style business class is giving passengers about 35″ seat pitch in a standard economy seat, and then blocking the middle seat for additional room.
When Air Canada rouge started with the publicized intent of being only used on leisure routes, I don’t think anyone thought that was the truth. Air Canada rouge, if you were not clear, does not use dedicated business class seats in “Premium rouge” on their A319s. It is standard Euro-fare: 35″ pitch with the middle seat blocked. No thanks.
If this only was showing up on leisure routes I’d just shake my head at the market segmentation, but with rouge replacing legacy Air Canada on flights to some of California’s highest yielding (and highest O&D) cities, I am going to press on with my latest point.
In the eyes of some of the airline revenue management operators, what is the point of business class? Simple; it’s better than economy. How much better than economy? That’s the question — “better” is a nebulous term.
There are some revenue managers out there who do not like lie-flat beds in business class for that very reason. People were paying similar fares for a recliner, then the competition went and ruined it for everyone and trashed the yields on their faux-fur backed outdated products. Airlines had to spend money on product to compete!
Being an insider, I can tell you that many airlines dislike the idea of moving to lie-flat business seats. Even in business class, standardization is king. Tick the boxes and don’t stray too far from the pack.
I fear we are at the start of a wave of downgrading, at least domestically within North America.
When economy class has become like riding in a Greyhound bus, what’s the point of offering even a simple 2-2 domestic business class product? People with the ability to pay are going to pay anything for “not economy.” It’s in your best interest, as a company, to offer the least product for the most people are willing to pay.
Whether they admit to it or not, every airline in North America is probably watching Air Canada’s Premium rouge experiment. If they can keep their yields up in the front cabin, expect other airlines to start “enhancing” their business class on certain routes until we’re left with Euro-business on everything but select transcon services originating in LAX, SFO, and JFK.
The good thing is, I am almost dead certain that they cannot beat down premium travelers enough to get this experiment to succeed. Regardless, Euro-business only works because many European airlines have a domestic network with routes that are usually no more than two hours. Two hours and a hot meal, not unbearable at 35″ or less seat pitch, but it is key that everyone else offers the same thing.
I feel that the Euro-business model will get crushed in North America. If there is any logic in the world, Premium rogue will die quickly.
Where does that leave us internationally? In a very confusing place, actually.
Here’s a term I never thought I’d hear when I was just a student studying the airline business: “high-density business class.”
I understand, everyone wants lie-flat, direct-aisle-access, and a modicum of privacy. These are things I look for in business class. Here are things I don’t look for, but are inevitable parts of high density arrangements: crowded overhead bins, limited shoulder room, tiny foot wells, etc.
When you are paying for business class, you don’t want these negative features. That is, if you are paying for more than “well, at least it’s flat.”
This is usually where I sit down and say “Hey… it’s the consumer’s fault!” This is the one time when it’s not, not entirely at least.
Industry consolidation has been good for one party: the industry. Even then, I debate that point as creating monolithic entities tends to make those entities extremely inert – but it looks great on paper.
The GAO (Government Accountability Office) released the results of a seven-year study proving what we all thought: Capacity is declining, frequency is declining, but yields are increasing.
Remember how during my last rant I was explaining that the easiest two levers to control in airline pricing are capacity and price? Reduce capacity system-wide, and price will go up. Well, price will go up if the competition also sees that they can get away with reducing capacity. I don’t want to call this collusion, because it’s not. It’s game-theory.
The problem with this game, from the consumer perspective (or worse, the “professional passenger experience nerd perspective”) is that it has created an even more bizarre reason to race to the bottom.
I’ve discussed, at length, how customers started this, but customers can’t take the ball and run!
Since we now have a situation where economy is more unbearable and more expensive than seven years ago, why stop? Who are you going to fly, hapless product-choosing consumer? Haha, we let you put things in the overhead bins for free! There’s your product differentiation now. It’s not seat or service – it’s avoiding “ancillary revenue generation!”
Oh, you want to fly business class? That’s great. Our seat ticks all the boxes, but feels like a coffin! Don’t expect to pay any less, though. Oh, and too bad we got rid of “real” first class.
Premium economy is the fastest growing market segment because it’s the only one most people can afford that isn’t torturous. It’s not popular because it’s good, it’s popular because it’s better than the alternative.
I’ve long held the theory that current “business class” will become the new “first” and premium economy will become “business class”. Relatively high-density recliner seats and all. The funny part is, the price on “premium economy” will skyrocket and we will be right back to the early 1990s.
While consolidation is the name of the game right now, it will not be forever. The airline industry loves fads. However, the fads that never go away are the ones that utterly hose the passengers.
Enjoy getting less for more.