How Basic “Unbundled” Business Class May Backfire On Airlines

After years of creating economy experiences so miserable, or basic, you had to pay up just to curate a realistic travel journey, airlines are turning their sights to business class as the next frontier for unbundled fares. And yes, it’s an attempt to extract more cash out of your wallet.

But there are many solid arguments for how the process may backfire entirely, while also raising the question of why airlines, on the brink of collapse, would use this time to make their most profitable products worse, and less enjoyable to customers?

They’re designed to get more money out of your wallet, but with a price difference sometimes over $1000 just for perks like lounge access, many people may take to the terminal again, and put that money elsewhere.

Unbundling Business Class

The concept of unbundling business class isn’t entirely flawed, but what’s coming along in the package matters, as does the flexibility in doing so. When Finnair removed a checked baggage allowance and cancellation options, it didn’t impact the actual journeys of many customers, just the trimmings.

It made business class more accessible in terms of pricing, but may have also shot the airline in the foot. Less price sensitive business travelers don’t often check their bags, so it actually gave them a way to buy up to business class comfort for less, which is unlikely to be what Finnair hoped for.

Sure, many travelers need the flexibility which comes from higher priced tickets, but for those that don’t, they’re able to experience the product for less money than before.

Qatar Removes Lounge Access

But when Qatar Airways announced that its new fare structures will remove lounge access and seat assignments from ‘classic’ business class fares, it became the largest leap to date in giving customers a less enjoyable travel experience, rather than fewer bags to bring along.

Hopes that it would create lower fares, much like Finnair, have been unfounded thus far, but there’s still time. For now, it means customers are seeing price differences of between $300-$3000, just to enjoy an airport lounge and select a seat, with the lowest ‘classic’ fares hovering right where they were before, but sans lounge access.

That’s going to make many fans of the brand – of which there are many – look elsewhere for better options which include lounge access at the same price, or actually buy down to the degraded experience, rather than buy up. After all, terminals aren’t so bad these days.

What About Actual Choice?

Rather than simply taking things away, and creating new gulfs in pricing, why not start with a price, and allow people to customize the things they don’t need? Not just lounge access, but everything along the way?

At $300 extra, a passenger may consider the potential benefits of buying up to the old experience which was once less, but many simply will not. When they don’t the airline has only created marginal savings, while frustrating loyalists.

If you’re going to unbundle, why not give someone the option of removing lounge access for a certain price, or removing seat selection for a certain price? In other words: either unbundle things entirely, down to booze or no booze, or leave it all in one package. There’s a strong argument for the latter.

Cable Television Is A Case Study

View From The Wing used a simple and eloquent example to highlight flaws in the logic at Qatar Airways, which stem from cable television bundles. Here’s the basis of the argument.

Cable TV providers bundle ‘packages’ of channels instead of selling each channel individually because it is profit-maximizing to do so. The cost of adding another customer to a television company’s access to Fox News or ESPN is near zero, and so a bundled strategy makes sense.

The cable company might sell sports and news each for $99. Customer A would buy sports, customer B would buy news. And the cable company would generate $198.

Instead, if they bundle sports and news into a $109 package, customers get both channels at a price that’s worthwhile to each and the cable company generates $218.Gary Leff, View From The Wing

Airlines have costs in operating lounges or granting passengers access, but many of those costs are sunk, or already there, and certainly don’t add up to $300 a passenger, per journey. The staff are already working these spaces, meals are already made, and drinks must be ordered for other passengers anyway.

Customers now also have far more choice at each juncture, thanks to emerging trends in airports from higher quality “pay as you go” lounges, to ‘chefy’ food establishments worth eating in.

Anyone flying business class is typically savvy enough with their money to say that spending $50 in the airport for a nice meal, or $100 for a terminal day room to sleep in, is better than paying $500 extra for the ticket.

Heck, if the ticket is $1000 more expensive for lounge access, some extra flexibility and seat selection, why not go buy some caviar and Dom Perignon to enjoy by the gate, or in a pay as you go loung you access for free via a credit card already inevitably in your wallet. You’re still netting out $700, overall.

Why Not Up Up Sell?

And why not try an up sell, instead of taking things away? Even in business class, some airline seats are definitely better than others. Why not charge $150 extra round trip for first come first serve claiming of those seats? That’s more revenue generated than the money that would be saved by depriving passengers of standard benefits.

Are some passengers willing to pay more for Dom Perignon in the lounge, rather than house wine? Are some willing to pay more for a pre-flight massage, or the guarantee of a private nap room?Of course. Revenues from these sort of “extra” items are likely to surpass the meager savings from taking away standard benefits.

There are a variety of ways airlines could offer upgrades along the journey to create extra revenue, rather than just take away. Delta, for example, allows customers to buy upgraded wines using miles or cash in Sky Clubs, while maintaining a solid minimum baseline of quality.

With travel in a global standstill, airport spaces are going unused, stockpiles of first class booze are collecting dust and rather than offering opportunities to elevate the journeys of loyal customers, airlines are experimenting with ways to make things worse.

Cost Savings At What Cost?

Sure, Qatar saves on lounge access it would’ve granted you, but that’s small money, and the point of these fares is, or was, to take things the other way, and generate more revenue with higher fare purchases.

If prices do drop below previous lows, It’s not necessarily bad news for travelers at all.

It’s just different, and it will create more competition among airports to best cater to all passengers in the terminal with better quality establishments. For airlines looking to squeeze a bit of extra money out of passengers, it may accomplish the exact opposite though, and they may find their customers spending money saved elsewhere.

How will unbundled business class impact your travel?