The Alaska March surprise was a no-notice drastic increase to award rates on partner Emirates. There were howls or betrayal and calls to restore unreciprocated trust.
Alaska’s initial responses have blamed the customer, specifically the ‘travel hacker.’ This, of course, is us, the people who have rarely flown Alaska, except perhaps to use their credit card’s annual companion certificate.
Leeches we are, not flying the airline, taking advantage of credit card offers and buy mileage promotions to redeem on Alaska’s partners. Why not cut us off?
Yet is that wrong? In moves to spinning off frequent flyer programs and shifting to revenue-based programs, comments from airlines about the value they get from all their other channels suggest that actual paid flying, other than high-end premium cabin, is perhaps the least profitable thing their customers do to them.
Alaska’s 2012 investor day revealed that less than ~1.4% of Alaska miles are redeemed for first or business class travel on partner airlines other than American and Delta. The 2015 investor day highlights 11% growth in credit card membership along with a new agreement with card issuer Bank of America that is adding $60m in incremental annual revenue.
We require nothing of Alaska other than to have a functioning website and call center, essentially a travel agency. We pay Alaska to book discounted tickets they have used their size to negotiate bargain rates with partners. For many of us, if their planes didn’t exist, we wouldn’t notice.
Avianca just hired a new CEO from Microsoft, with no aviation experience:
Avianca did not choose a CEO to manage takeoffs and landings and inspect an A320’s vertical stabilizer. The company’s board of directors, led by chairman German Efromovich, chose someone to implement a visionary strategy for interacting with passengers digitally. This means everything from sophisticated, analytics-driven methods of pricing and selling Avianca’s core product—seats on flights—to using the airline and the passenger’s journey as a platform to sell a wide array of services. And using websites and mobile apps to provide the passenger with information that will make his or her air travel experience better and easier.
The piece cites a Motley Fool Interview with Volaris’ CEO, which lays out his vision for ancillaries:
…And then there’s a third avenue, which is much more touch-points to sell throughout our customer journey. We have identified opportunities to sell products and services around this traveler’s journey, which will allow us, for example, to have better presence on volaris.com and the mobile apps. It will allow us to sell more — I mean we just launched an application that’s selling at the airport: at the counters and at the gates. We strongly think we can really improve our onboard variety of products and start selling taxis and hotels and everything onboard, and then use that for a platform to sell in call centers. This whole thing we just launched. And then finally OTA [online travel agencies] and travel agencies, there’s a good possibility for us to keep on expanding ancillaries there.
Avianca already is a pioneer in this area. From regional Latin American airline they have made inroads into North America not with their flights, but with their LifeMiles program and aggressive (and presumably, profitable) mileage sales. How much profit have they gotten from customers that otherwise may not have ever given them a look? I don’t think Avianca cares if any of us every fly them if they can keep being our travel agency.
Readers, weigh in!