Hawaiian shirts, predictably easy going destinations, too much luggage and generally a beer belly to complete the picture, Jane and Joe Holiday were once almost a laughing matter to airlines. But now, with business travel all but dead, and no pulse forthcoming any time soon, they’re one of the few hopes for airlines in recovery.
You don’t need to look any further than the aging planes, alternate airports and second rate facilities offered to leisure travelers to see that they were never taken seriously, or even remotely respected by airlines too busy tripping over their own laces to pander to lucrative corporate contracts on “premium” routes, like New York-London, Melbourne-Sydney, Dubai-London, or San Francisco-New York.
These flyers were so sought after, airlines would literally hand out top tier elite status like candy, to decision making executives or travel managers who signed off on the expenses.
It’s true all over the world, but the UK is a beyond perfect example, where leisure flights either left from an alternate terminal, or even alternative airport entirely, ensuring that the “business elite” never had to rub shoulders with happy-go-lucky holiday makers in their enthusiastic travel outfits. For decades, Gatwick was where leisure travelers departed, and Heathrow the high brow socialite business types.
Business travelers in the front end of the plane made up circa 5% of airline traffic, but more than 30% of overall revenue thanks to fatter margins, mostly stemming from a lack of price sensitivity. These businesses and their many global road warriors weren’t reading blogs looking for sub $1000 business class fares, or $99 economy fares, they were buying thousands of $5,000 fares in bulk, in advance, making airline revenue managers dreams come true.
Those days are over, and for the time being, convincing Jane and Joe to spend their $700, once a year is now the only way forward for airlines who once couldn’t have cared any less about them, just a year before. If they can get them to do it twice, they may just survive, after all.
For years, huge profits upfront lead to almost subsidized prices in the back, with basic economy airfares dipping into the $200’s round trip from time to time, even on long international flights between Europe, the USA, Asia and beyond, particularly between key business cities. It brought airlines nearly a decade of record profits, all of which were eaten in the first months of the covid-19 pandemic, or at least so they say.
Cough, stock buy backs.
One place those ultra low fares were never found however, were leisure destinations, the prices for which hardly ever changed and even more rarely screamed “deal”. Think: Barbados, Maldives, etc. Airlines knew that those ‘suckers’ would pay anything, and they charged accordingly without remorse, without giving even a decent new plane in return. It never seemed fair.
But still, loyal Jane and Joe Holiday paid, with impeccable timing each and every year for their little slice of heaven, and unlike business travelers, many of them still are. If they had a great time, they’d even consider two getaways. They were paying $700 or more for the same economy seat someone on a premium route was paying $200 for, but they didn’t care – they just loved to travel and valued it, rather than see it as a work obligation.
These travelers and the places they go, without flexibility on dates thanks to school holidays, or season thanks to weather, are now one of the few areas where airlines may find the margin needed to survive the global pandemic.
With key business routes such as those between Europe and the USA, Europe and Asia, USA-Asia, and Middle East to the world et al, mostly shut, or impossible to justify due to quarantine requirements, those little slices of leisure travel paradise represent the few options for airlines to pick up the pieces.
Yes, business travel is dead, and leisure travel is the only hope, for now…
Accordingly, airlines are doubling down on routes like the Caribbean, Maldives, and anywhere else that will take their customers right now. How ironic, that it’s the Joe’s and Jane’s who “weren’t good enough” to even enjoy the airlines flagship facilities just months before, who are now the key target demographic for recovery, until further notice.
After decades of shoving leisure travelers into planes old enough to buy their own drinks, laughing at their upgrade requests, and double charging, airlines are now begging leisure travelers to love them again. They’re now the only target market for near term recovery. If people are traveling, it’s to see family, or to getaway from reality somewhere nice. It’s certainly not for business.
Leisure travel, or any travel related to seeing of family and relatives is recovering much faster than business travel, and we can all now sit back, relax and enjoy the popcorn as airlines shift from offering loyalty programs and promotions which only benefited price insensitive travelers, who didn’t even choose airline anyway – their company did – to begging good ole’ Jane and Joe to take to the friendly skies again, and rewarding them kindly if they do.
Interesting product loyalty research. @godsavethepoint seems like long haul flight loyalty doesn’t change much! https://t.co/zBCiUbpaPH
— Sid Datta (@ssjdatta) July 21, 2020
The good news for airlines? Marketing research shows that one great experience is all that’s needed to harness a loyal long haul flying customer forever. Of all the competitive products in the world, an airline competitor would find among the toughest times trying to win market share in air travel, versus other things, like new televisions.
The first airline to answer the call, and create simple loyalty promotions people can understand and benefit from, without needing to be on impossibly expensive corporate tickets, may just win new fans forever. Right now, every airline needs every fan they can get.
Well said Gilbert! I traveled 150,000 miles mostly in premium economy in 2019 and 65,000 miles in 2020 – all on my own dime – often taking indirect routes to keep my status with United. They weren’t interested in my business because I bought the cheap PE tickets and didn’t splurge on Business class. All they cared about was how much cash I spent. Earlier this year, I thought that 2020 may be my last year on the hamster wheel as it became more and more difficult to earn top tier elite status with just about any airlines, especially United. I have decided to continue earning elite status, just not with United as they didn’t value my business when the going was good.
Well said. The contempt for the customer has come home to roost.
This is a very interesting article, wish others would get outside of their bubble and write like this.
Well done G for thinking outside of the box.
When all this hit I knew the airlines were being very shortsighted ( whilst ironically making very long-term predictions “Apr travel won’t return to normal until 2023” anyone!).
3-4 weeks in I realised that airlines should at that point start focusing marketing on leisure travellers as it would be them, not business travellers who would lead airlines recovery.
They are slowly coming around to this realisation.
We count ourselves ( me and the better half) as “leisure FFs”. We fly on avg once every 6-8 weeks. Often simply for an extended weekend break ( say 4, sometimes 5 days) from the UK to somewhere in Europe. We then have a couple of LH ‘biggies’ as an example 2020’s biggies were…..
LHR-MSY-MIA-NYC-LGW and LGW-CAN but at the very top end of the market with the holiday costing £3.8k for ten days ( which was actually a BA Holidays bargain as the same normally costs upto £5.1k!) We only ever fly J and occasionally F on 2-4-1s so while we don’t bulk buy flights like corporate teams do our spend is not insignificant on either an annual or quarterly basis.
85% of our free money goes on travel as it’s our passion and during this crisis £9k of flights and holidays has been refunded so far( which doesn’t include the trips mentioned above). Whilst we are probably the minority when it comes to leisure travellers airlines need to realise there are some of us with funds to make a difference to them and start looking after us better. I have guaranteed status for another year for both OW and SA ergo I’ll consider sluming it on EZY ( who I don’t mind and have nearly 200 flights with under my belt) if I’m not getting a good enough deal this year.
Interesting article G and a great read as always.
I would highlight that some of the big players have a somewhat naive approach towards Joe and Jane following the refund debacle.
Certainly this Joe and Jane will not forget who has taken months to refund cancelled flights and achieved a new low point for a truly shocking customer experience – yes VA and EK I am talking about you.
Much as it pains me I have to give full credit to BA who refunded me in less than 5 days.
It would need to be something very special to tempt me back.
What a shame the leadership of BA haven’t understood this shift and persist in over charging and duping their customer base.
Great that alternatives on most routes when surcharges and other costs are included are cheaper and they trade more honestly are reliable in that their IT meltdowns and strikes are far less frequent.