In case you didn’t get the hint in recent years, with new “extra” fees for everything except using the on board lavatory, airlines weren’t all that interested in making most passengers happy. It was all about the Benjamins, and when it came to the money, it was all about keeping corporate and luxury travelers who never questioned the price happy.
Remarkably, travel in the USA and Europe has rebounded faster than most predicted, which you’d think would make airlines happy, despite grim uncertainty heading into autumn. You’d be wrong, kind of. If there’s any positive that came from lockdown, it’s that travel truly is precious, and many people are diving back in, but unfortunately for airlines, it’s not people who don’t look at the price tag.
Passenger numbers are up, but airlines are down, because the high margin travellers they almost exclusive catered to are the only ones who aren’t back, and won’t be.
Fly anywhere for leisure these days, and you’re bound to find a fairly full flight in economy. If it’s not, it’s likely because the airline is limiting capacity to keep middle seats blocked, a move which Delta, JetBlue and others are currently using to restore passenger confidence. But up front in the first, or business class cabins, it’s mostly a ghost town.
Premium corporate travellers accounted for only 5% of airline passengers in 2019, but over 30% of the overall revenue. In other words, they’re the people airlines make real “profitable” money from, and everyone else just isn’t quite as exciting.
It’s precisely why upgrades, comp’d perks and other joys of travel were handed out like candy to entities pre booking 1000 high margin seats a year, or much more, and why you couldn’t use your miles, or ever find availability for a flight upgrade in the last few years.
Without that 30%, airline profits are unlikely to reach 2019 levels any time soon, and risk averse businesses are finding great success with teams on the ground, which is even worse news for airlines.
A plane full of $500 a ticket leisure travelers isn’t nearly as profitable as a plane full of $500 a ticket leisure travelers in the back, 10 people paying $5,000 a pop in first class, and 40 people paying $3000 a pop in business class too.
When corporate travel does eventually return, travel managers will find greater difficulty in justifying sending a banker, or tech exec across an ocean at a cost of $5000 for the ticket, plus $100’s transfers, plus $100’s in hotel, plus $1000 client dinners, when relative success is still being achieved without ever leaving the house.
For many road warriors, it’s a new existential travel crisis, whether anyone would like to admit it or not, but it’s certainly not over.
Even businesses which don’t blink an eye about the money face new pressure over risk management, for their employees and the safety of others, as well as the responsibility of sending people out into the world with such frequency.
Airlines are down, because they must cater to a new audience, and that means revamping everything from the number of seats in each various class, to the basic messaging of what they offer, and how they reward flyers.
Loyalty programs must once again become viable for more people, and not simply base perks on money spent. Volume – aka choosing an airline frequently – not just the margin of a passenger will need be part of the game again for years to come, and that means bringing back many of the features passengers previously adored.
Don’t be surprised to see things like seat back entertainment make a come back, or little treats like Biscoff and coffee, served with a smile. If airlines have proven one thing in recent times, it’s that they like to copy each other. Once one airline adds a favorite amenity back, so will others. It’ll be just like when they took amenities away creating things like basic economy.
Airlines are quickly ramping up operations in some markets, while scaling back heavily in others. Can you guess which routes are being fast tracked? Leisure destinations like Barbados, St Lucia, the Maldives and Mexico are open again, and unlike business travel demand which comes and goes, there’s always interest in a sunny getaway. New York, Los Angeles, Hong Kong – restrictions aside, the travel desire just isn’t quite yet there at the moment.
For airline customers, a slice of humble pie for their favorite carriers may not be such a bad thing. There will be more attractive opportunities, promotions and perks added in the next two years than the last 20 before them. For airlines, things are down and until everyday customers are embraced and valued once again, it’ll be that way for a while.