Find out how airlines are turning what were once considered greedy price-gouge tactics into sought after upgrade options, and which top airline stock is one of the best to buy today …
Airlines have taken a page right out of the playbooks of retailers and restaurants.
For years, these industries have found innovative ways to make customers spend more.
From bonus gift cards to reward points, “buy one get one” (BOGO) to super-sizing, the list could go on.
Now airlines – the recent victims of volatility and dwindling profits due to rising costs of fuel and labor – are becoming more creative in their quests to squeeze the most dollars out of each passenger seat.
And for the most part, they’re doing it without making you feel like you’re being duped.
Remember when checked baggage charges and fees for changing reservations first became the norm?
To this day, they remain the two largest ancillary fees that domestic airlines charge.
According to the Bureau of Transportation Statistics, the nation’s 15 largest carriers collected a combined $3.5 billion in bag fees in 2012, up 3.8% from 2011. The carriers also tallied $2.6 billion in reservation change fees, up 7.3% from the previous year.
However, these ancillary fees were never something that passengers particularly enjoyed having to pay – especially when something like checked-luggage used to be free.
Airlines recognized this, so they’ve begun to adjust their revenue model to try and cater to what passengers would be willing to pay extra for.
Now the focus is on enhancing the personal travel experience.
From the airlines’ point of view, the latest perks and upgrades bring a sense of fairness to the system. After all, why should a passenger with a laptop and backpack help subsidize large groups and families with checked luggage?
Jamie Baker, an analyst with JP Morgan Chase, likens it to a meal at a restaurant. “The sides are not included in the price of a steak,” he says. “Airline ticket prices should reflect the costs incurred by the individual passenger.”
And when given these options, a growing number of passengers are more than happy to oblige.
In à la carte fashion (no pun intended), it’s becoming the norm for customers to be presented with options such as access to exclusive airport lounges, on-board food and beverage sales, as well as seat assignments and entertainment options.
But that’s just the tip of the iceberg…
You can now pay to eat first-class meals in coach, book a seat with more legroom or reserve an empty seat next to you during your flight.
And for those who don’t wish to deal with their luggage, they can even have their bags equipped with RFID tags to bypass the ticket counter or request to have their bags delivered straight to their destination of choice.
With major advancements in customer relationship management (CRM) technology, airlines are able to upsell from the moment customers begin to pick their flights online at home right through to the departure gate on their smartphones with email alerts.
Combined with baggage and reservation charges, these ancillary fees now account for 10% of US airlines’ revenue.
In other words, the growth potential in this area is utterly massive.
Top Airline Stocks to Buy Today:
Very soon, airlines will be able to harness all the consumer data they collect to further customize offers to the individual passenger, much like the way eBay and Amazon are able to suggest products based on previous buying behavior.
And Delta Air Lines, Inc. (NYSE:DAL) is one company that’s on the verge of making that happen.
Just recently, the airline began giving wireless devices to its flight attendants that would allow them to sell last-minute seat changes or upgrade to seats with more legroom.
The company anticipates rolling out new programs shortly that will help to seamlessly create a tailor-made trip for each of its passengers.
Eventually, it would reach a point where no two passengers will be paying for or getting the same flight experience.
“We have massive amounts of data,” says Delta CEO Richard Anderson. “We know who you are. We know what your history has been on the airline. We can customize our offerings.”
The bottom line is: airlines are trying hard to make flying enjoyable again while still being able to stay profitable. By giving each passenger opportunities to enhance the way they want to travel without airlines (or other passengers) footing the bill, the sky really is the limit for companies like Delta.