How much more will regular flyers pay for ‘enhancements’ per sector?
It’s a formidably difficult question to ask, but one that Virgin Australia for example, is clearly working on.
As this Fairfax report also reminds us, no one is in any doubt that the key figure in the story, John Thomas, will replace, most likely in an amicable transition, the current Virgin Australia group CEO, John Borghetti.
But there are inherent contradictions in the pursuit of lifting yields through ‘enhancements’ that risk making full service high quality carriers like Virgin Australia more like low cost carriers, like its Tigerair subsidiary, or the larger Qantas version of same, Jetstar.
It’s always difficult to make people pay for something they previously took for granted, even if they seldom used checked luggage for most of their flights, or rarely ate the airline food, a choice recently reported to have been championed with his trade mark elegance, by celebrity chef Gordon “F*cking” Ramsey.
John Thomas will have to make those who never paid extra for anything willingly part with money they mightn’t be able to claim on their travel expenses without actually suffering the unintended consequence of making too many of them switch to Qantas, or Jetstar, or even Tigerair.
However, on his past record assisting American carriers rake in billions for checked baggage fees, Mr Thomas may well prevail.
Virgin Australia’s recent launching of Economy X, which offers lots of additional legroom for remarkably small amounts of money, is a case in point. It creates a much more favourable view of the Virgin brand than before, and at a time when most airline news stories are about the United attack on a paying passenger.
Back in the ‘90s, then Ansett chief Sir Peter Abeles, told this reporter (for The Bulletin) that as little as $5 extra revenue from each passenger boarded per sector, would turn the persistently unprofitable yet gold plated flying experience that it offered into a gold mine for its owners (News and TNT).
That $5 probably equates to $20 per head today, and with full respect to Qantas and Virgin Australia, neither offer anything remotely like the amenity of Ansett’s economy class, never mind in premium cabins.
Nor was Abeles right. It would have required a radical cost and efficiency restructuring at Ansett to deliver on the benefits of such a revenue boost. But the question still begs attention. Is a small premium for a superior product a better way to lift a full service airline brand?
Ancillary revenues also come with organizational and collection costs. Hands up all those who discovered the pre-ordered meal they paid for on a low cost carrier never eventuated, and the telephone number for seeking a refund either didn’t exist or was never answered? Or was in Singapore, or maybe Manila?
Perhaps the real solution to the desires of regular flyers for more amenity, and for airline owners for a profitable investment, is the one Abeles never managed to implement. Just charge a little bit more per seat per sector, and sell it as a branded virtue.
An extra $30 per head between Australian capital cities is less than $10 more than the cost of the Sydney Airport Domestic rail station gate pass on a return day trip, or a triviality compared to what you pay for a taxi or Uber, or terminal parking charge.
If the included meal fits on a full tray, like it used to, instead of in your palm as some sort of mystery pastry with yucky sugar crystals, the customer feels much better.
If the seat pitch is as little as three or four centimetres roomier (like it used to be) the customer is less likely to relegate flying to a chore instead of a pleasant experience, and if the ratio of seats to toilets is restored to a much friendlier level, views about the desirability of flying might also improve considerably.
At the moment, and particularly overseas, the managerial approach to lifting airline yields is getting the Tim Tam or other grocery product treatment of trying to hold the price the same but cutting the number of biscuits or quantity of the goods offered in the familiar package by around 10-15 percent and hoping no-one notices.
Imagine for a moment, a campaign by airline V or Q proclaiming “We cost $XX more, and we’re worth every cent”.
It might well work. Making full service products similar in discomfort and lack of quality as low cost brands might well not work as intended at all.