Us airlines are fighting over leisure travellers, the historic second-class citizens of flight, like passengers on a crowded plane angling for the last available overhead bin.
United, american and delta airlines have all discounted fares, eliminated change fees and revamped their networks to add more flights to holiday destinations as they seek to appeal to the only people flying right now.
The pandemic has forced large airlines to focus on winning business from the roughly 80 per cent of passengers who bring in just 50 per cent of the revenue with corporate travellers staying home except when they, too, are tempted by a sun-and-surf getaway.
While the strategy has yielded working capital for airlines and decent deals for would-be holidaymakers, analysts said it is a long-term loser for the largest us carriers because it cannot cover the costs that accompany running a network for business travellers.
Its a comeuppance, if you will, of these companies which have been very focused on frequent customer relationships to the exclusion of everybody else, said airline consultant robert mann. so that is a bit of irony.
The spread of covid-19 has caused catastrophic disruption to airlines worldwide this year. fear of contagion combined with governmental restrictions caused us passenger traffic to drop 96 per cent in april, according to data from the us transportation security administration. it has recovered some but remains two-thirds less than october last year.
In september, capacity at the three largest us carriers by revenue was down 50 per cent for domestic flights and more than 70 per cent for international routes, according to data from aviation consultancy oag.
Business travel has not rebounded as quickly as leisure, and airlines expect that some portion of that travel on pricier tickets will never return. so the largest airlines are pumping their schedules full of point-to-point flights to holiday destinations, bringing them into direct competition with smaller low-cost airlines.
Alaska airlines, citing a sun and snow strategy, increased offerings to mexico and the nearest airport to lake tahoe. united said on october 2 that it will increase its service to more than 40 caribbean and mexican beaches in november, after previously adding more flights to florida. american airlines has added 33 new routes since june, plus two new destinations in mexico.
Southwest airlines addition of flights to palm springs, california and miami will bring us access to additional revenue at a critical time, said chief executive gary kelly.
The current competition for infrequent travellers shows an extraordinary effort from airlines, mr mann said, with pricing somewhere between attractive and smokin hot attractive.
Meanwhile, dropping $200 fees to change a ticket reassures customers they will not be penalised if their plans change, encouraging them to book a trip. simply getting bookings is important for airlines, because it gives them customers money to use as working capital, mr mann said.
The move creates goodwill, even as more lucrative fees, like for checking baggage, remain in place. us airlines brought in $2.8bn from change fees in 2019, compared with $5.8bn from bag fees.
The airlines are seeking potential customers like juliana mazzone. after the pandemic scuttled her previously planned trips this year, ms mazzone found herself itching to go somewhere. she and her sister found a $300 flight to aruba on united from newark, new jersey, packaged with a five-day stay in a resort for another $1,000.
They chose the caribbean island because the package offered a deal for a destination that in normal times seemed more out-of-reach than mexicos beaches. a year ago, a round-trip ticket from the new york area to aruba would have cost 18 per cent more.
It was a bang for your buck situation, she said.
American airlines chief revenue officer vasu raja said the company is attempting to build relationships with current flyers and graduating them to higher tiers of loyalty.
There is simply not enough traffic, he said last month. its causing us to really rethink how we approach leisure and business.
The largest airlines did not until now view leisure travellers as the top priority thats a nice way to put it, said savanthi syth, an analyst at raymond james. but as they attempt to change strategy, they are saddled by the costs associated with catering to corporate travellers, everything from first-class lounges to networks built around multiple daily flights between business hubs.
Those are all higher costs things, but when you have business travellers, you can sustain that because they tend to be more premium fares, she said. they cant sustain this longer term unless they remove some of those things.
Airlines efforts to court leisure travellers has encountered some scepticism. dave mason has racked up miles with united as a strategy director at a chicago brand communication firm, but even before the pandemic, an industry shift toward remote work meant that when he flew, it was usually for leisure.
The airlines have neglected leisure travellers, he said.
I wont say mistreated them, but you were definitely the bottom of the barrel if you were not a business traveller in the past, he said. people get jaded by that. youre going to gravitate toward the airlines that treated you least worst.
Courting leisure travellers, he added, is the only avenue theyve got left, so i can see why theyre doing it, but it just seems like desperation.