Monday Musings
A holiday potluck of news around the biz
While most office folks probably have the day off today, there are plenty of folks who do not. Hopefully both of these groups can enjoy these quick takes on some recent industry stories that caught my eye.
Delta Keeps Unbundling
Delta President Glen Hauenstein confirmed the recent rumors that Delta plans on “unbundling” its premium cabin fares. Unbundling is industry code for taking a fare that once included services X, Y, and Z, and now making it only include service X, with a new higher fare to get services Y and Z. But halfway through booking, you might be able to buy up to include the Y service you didn’t add on at your initial selection. And after you actually book, you might receive an “exciting offer” to add service Z.1
This drive towards valuing every single aspect of a ticket purchase is nothing new. Doing it in Premium Cabins isn’t necessarily new, either, but it is a big step forward in the US industry, particularly when it comes to big-ticket international business class fares.2 My unofficial analysis concludes that the kind of people who book business class fares on their corporate accounts are going to be surprised when they suddenly can’t pick their seat assignment in advance or lack the ability to make changes.
There is a whole (very smart) contingent within every airline’s HQ that views things as one big math problem. I am sure that a ton of analysis has been done on how unbundling premium fares will drive X% in additional revenue or increase paid load factor by Y%. That’s their job! Still, I’m wondering at what point does the other side of the business push back and argue that the endless quest for ultimate fare disaggregation goes too far?3
United Keeps (Passengers) Pre-Ordering
United was in the headlines this past week for a variety of things, including an anticipated strong earnings call this Tuesday, a wheel falling off an A321 after a hard landing in Orlando, and CEO Scott Kirby speaking a bit off the cuff about a competing travel app (and a lot more).4
But something that did not make big headlines was the announcement that starting in March, passengers must pre-order meals for Economy flights over 1,190 miles.5 This was accompanied by the usual press release material about reducing waste and streamlining catering operations.
In today’s age, this seems like a welcome development. I can order my Tacos al Pastor in advance!
But, as I have noted before, what happens when things change?
Let’s say I have to make a last-minute flight change due to a sudden work conflict or God forbid, I miss my connection at ORD due to a 45-minute taxi from the runway to the gate.6 What happens then? Do I shell out $24 for a Torta at Frontera Grill? Or do I settle for a Tapas box onboard? Or do I eat 13 or 14 chocolate quinoa crisps?
Unfortunately, there was nothing in United’s press release about those scenarios.
Starlink Keeps on Rolling
There will never be an end to the Wi-Fi wars, but Starlink struck yet another blow with the Lufthansa Group’s announcement that it would begin rolling out free Starlink Wi-Fi across its 850 aircraft. Installations are set to begin later this year.
While this is definitely not a political blog, it’s worth noting if there ever was an airline group with pressure to resist a Starlink implementation, it would be Lufthansa, particularly given their leading position in Europe. However, Starlink’s high-bandwidth/low-latency solution is proving too hard for so many carriers to resist.
As dominant as Starlink’s aviation offer has been in recent months, one must always remember that the airline industry hates sole suppliers. Airline executives, particularly in “strategic sourcing,” will constantly be monitoring for other potential solutions the same way they do with aircraft, engines and even snacks.
When it comes to airline buying practices, promiscuity is not a flaw.
Notes
Services X, Y, and Z may include everything from advanced seat assignment to ticket refundability to free changes to additional checked bags - you name it, airlines can “disaggregate it”
Delta is already doing this with its Comfort Basic fare that it launched late last year, and a number of international carriers, including the vaunted ME3, offer a “basic” business class product that prohibits lounge access and seat selection among other limitations
Having been on the “customer” side of the airline business, you’re usually bringing a knife to an internal gunfight — it’s hard to battle the cold hard spreadsheets
Kirby’s interview with Stratechery is one of the more exhaustive airline CEO pieces I’ve ever read — highly recommend
I do love when airlines put in a specific number like this — there’s always a some cost-related reason
Perhaps speaking from experience