At the end of 2012 American Airlines introduced fare bundles.
The idea was to offer a modestly higher fixed fare price for a set of value-added benefits, that you could purchase at time of ticketing — through American’s own channels, and also they hoped through third parties as well.
You’re offered ‘choice essential’ and ‘choice plus’ options today when you go to buy a ticket at AA.com, in addition to the cheapest coach fare and cheapest first class fare.
When first introduced these were a pretty good value, and they quickly raised price. And then they scaled back benefits.
- At the outset for $68 extra you could avoid ticket change fees (so save $200 if you wound up changing a ticket) and you got one free checked bag plus priority boarding. For a non-elite who might make a ticket change, that was a good deal.
Even better, if you were going to buy that for $68 then for $88 you’d also earn 50% bonus miles, avoid same-day change fees (something only Executive Platinums get free) and a premium beverage onboard. The first cut was to avoiding change fees from the entry level buy-up.
Here’s where bundles stand today:
I never entirely understood the argument for offering these as part of the airfare, rather than ancillary offerings for an extra charge, since domestic airfares are subject to a 7.5% excise tax while fees are not. American said they wanted to change the way airfares are sold. I’ve been skeptical of that approach.
Offering this as a fare meant that travel agencies could more easily sell American’s bundles using existing technology. It meant less a la carte, and more of the extra passenger revenue going to the government.
American may be giving up on this approach. JonNYC who usually gets tipped off about such things tweeted,
Indeed, right now on American’s website when I search for travel starting in early December I’m not being presented with the option for Choice Essentials or Choice Plus bundles.
As American struggles to figure out how to grow revenue without expanding, and without many incremental seats to fill, they’re left only with the possibility of getting each existing passenger to pay more.
Instead of trying to continually offer more value at a lower price, they’re trying to figure out how to offer less value at any given price point and get customers to spend more than before for the things they’re used to.
Part and parcel of this will soon be selling basic economy fares which don’t include any changes at all, or advance seat assignments, or presumably allow for elites to upgrades. Taking away the basics from today’s cheapest fares they hope customers will choose to spend more money. And they hope customers who go out of their way to choose American won’t feel like if they’re supposed to buy exactly what they’re getting on each trip, that they won’t just buy from whomever is offering that at the best schedule and price.
Any changes that are coming to upsells will be a part of American’s shift towards encouraging customers to spend more on each transaction. It’s what Delta and United are striving for as well, with Delta already in the lead.
Can’t wait for the quintuple mile promotion! Oh wait a second, it’s all revenue based now. lol
I think it is a wishful thinking from AA management to squeeze more revenue for the same or arguably worse product. If AA hopes to sell an airfare with the same restrictions and rules as Spirit airlines and then up-sell additional benefits, they will end up with their customers flying Spirit or better yet Southwest. At least they will be able to earn frequent flyer miles on Spirit!
So far none of the strategies of the big three US airlines to raise revenue per seat seem to be working. The only “helpful” is the copycat strategy that eliminates any differentiation.
Just like everything else they made the bundles worthless and then wondered why people weren’t buying them.
I see even Delta is struggling o ten revenue front right now. Customers are starting to figure out loyalty doesn’t matter. I’m proof. I fly whatever airline works best and if I hit status. Great ! If not. No worries. These companies have really turned bad and greedy. The profits won’t last forever.
The presentation for these options sucked. For somebody unfamiliar with AA’s site, the matrix of flights and bundles was overwhelming. If they simply had people select a flight, and then a bundle (as separate costs of course, to avoid sticker shock), more people would have given it consideration.
After 9 years as an execplat, I dropped AA loyalty with the devaluations and am now buying discounted first on UA or simply flying Southwest. It’s interesting reading all of this, as AA can’t seem to get it together. Free agency is a wonderful thing. It’ll be interesting to see if AA figure it out, but I remember the days where Doug Parker and crew were charging passengers $2 for water. Let’s just say that I’m not optimistic that his crew will figure it out.
IMHO, I’m seeing UA on a positive customer experience trend and AA on a negative customer experience trend … and that’s how I’m spending my $$$.
Gary, do you agree with me that Virgin America’s new Plans Change Pass and Power Trip package are the way of the future for fees? They are not bundled into the fare and they are reasonably priced. A permanent waiver of change fees (unlimited changes allowed) for less than $30 is a deal for customers who hate change fees.
Once you buy a ticket, those funds are locked in for use only on Virgin America. So the benefit for the airline is that by charging a much more reasonable fee it captures your business and gets a chance to build a long-term relationship.
@nsx – I think it’s too good a deal for the majors to adopt, i also don’t think it does a good enough job gating the kinds of fares that price insensitive business travelers buy vs what leisure travelers buy
@Gary: That’s depressing. You’re right that companies would probably routinely purchase the Plans Change Pass, reducing revenue to the airline. The airline could perhaps reduce or eliminate this loss and build loyalty by making the Plans Change Pass available ONLY in a bundle with upgraded seating and free internet and other perks that companies might not be able to justify paying for. That would bring it close to the Choice Plus package that AA is now abandoning!
The change is here. I happened to be checking fares every day so I noticed the change. The other thing I noticed is that the lowest cost for my fare is the the same as the former choice plus cost of my fare. I don’t now if this finding is because of timing or strategy. But, I just booked on United.