We’ve seen a steady stream of cheap business class fares of late, and it is not unreasonable to question why this fundamental change is occurring.
The bean counters have figured something out – leisure and business travelers at the margins are willing to pay a bit more to secure premium cabins well in advance of travel. I won’t say upgrades are dead, but most decisions in life are predicated upon a cost/benefit analysis and the whole upgrade waiting game grows tiresome when the sure thing only requires a little more spending. And let’s be clear – that is exactly the way the airlines want it to be. Were it as easy as a few clicks to use your miles to upgrade, it rarely would make sense to buy business class tickets.
But when you are left hanging, often till minutes before boarding, as to whether you get the upgrade, the thought of paying a bit more to secure your “upgrade” in advance becomes oh so appealing. I certainly speak from personal experience here.
Airlines were thus faced with a choice. Continue to price premium cabins in a frankly incongruous way, hoping to attract a few leisure travelers willing to cough up huge sums along with corporate travelers whose company travel policies dictated carrier choice. That left an opening for a lot of upgrades, often filled by travelers like me who would buy the cheapest upgradable coach ticket and then upgrade. It sort of balanced out.
But in escalating a program of selling cash upgrades to anyone willing to pay over the last several years, airlines found that consumers were very interested in paying to confirm a comfortable seat at a rate that still was profitable to the airline. And so we’ve seen a new frontier of pricing – business class pricing that is not 8-10x the price of an economy but often only double, if even that.
The plan seems to be working. I had dozens of clients jump on the British Airways business class tickets last week and we are not just talking about international travel, I’m seeing more and more people spend $800 instead of $500 on a domestic r/t just to avoid playing the upgrade roulette. And you know something? I’ve bought domestic first class tickets this year as well, a first for me (not counting mistake fares)…
So the question then is what are these seats worth? Are airlines conceding these seats are not worth what they once charged or just innovating in light of changing consumer demands and a growing desire for premium travel?
A little of both. The answer to my question is that airlines have simply realized that in this economy, they can make up in volume for what they lose in price and at the end of the day, attracting customers willing to consistently buy premium cabin tickets may be just as smart as rewarding very frequent travelers with complimentary upgrades on cheaper tickets. Because if those frequent travelers are like me or my friends, they are still loyal and now just more likely to spend even more than before.
The good news is we are going to see a lot more reasonably priced premium cabin tickets. Stay tuned!