It took airlines an extended time to comprehend they might make tens of millions from getting economy customers to pay twice for his or her seat. Once for having access to a seat via their ticket and the second time once they wanted to take a seat in a specific seat, and so was born the seat task business model.
Selling preferred seats is big business
There are a handful of airlines globally that earn more income from selling ancillary services and products than they do from selling tickets. While this fee-for-service approach began on this planet of low-cost carriers, it’s now embedded at many legacy carriers which have unbundled fares within the name of giving passengers more alternative, with one alternative being where to take a seat, which just isn’t a reference to their class of travel.
Photo: Vincenzo Pace | Easy Flying
The topic of seat assignments, particularly because it pertains to families sitting together, in some way made it into US President Joe Biden’s State of the Union Address on February seventh, when he said:
“We’ll prohibit airlines from charging as much as $50 roundtrip for families just to take a seat together. Baggage fees are bad enough – they cannot just treat your child like a bit of bags.”
IdeaWorksCompany (IWC) is a US specialist consultancy in airline ancillary revenue strategy and usually reports on developments within the sector. Its president, Jay Sorensen, said those words strongly suggested it was time to review the state of assigned seating fees to find out the dimensions of activity, how these are implemented and the way this ancillary revenue business could be improved.
Last week IdeaWorksCompany (IWC) produced a report entitled , which said eight key US airlines generated $4.2 billion from assigned seat revenue in 2022.
Photo: Delta Air Lines
The eight airlines analyzed were Alaska, Allegiant, American, Delta, Frontier, JetBlue, Spirit and United Airlines. It could surprise some that assigned seating now generates around 80% of the revenue that comes from checked baggage, which IWC estimates was $5.1 billion for a similar eight airlines last 12 months.
Is it too complicated?
The IWC report sets out all of the methodology and assumptions made to provide the revenue estimates and in addition stresses that these numbers are for the US domestic services of the eight researched airlines. They don’t include the longer international flights or global carriers, which might add billions more to the revenues generated by seat assignments.
IWC said that Alaska and Delta will not be in the next table because they don’t allow consumers who’ve purchased a basic economy ticket to pick and pay for an assigned seat.
Source: IdeaWorksCompany
The report highlights that booking an assigned seat could be complex and can have terms and conditions that, in effect, don’t guarantee the chosen seat anyway. Sorensen believes these onerous terms and conditions and lack of disclosure “invite regulators to give attention to ancillary revenue,” which can explain how the topic made it into President Biden’s speech.
With seat fees now a billion-dollar revenue opportunity and consumers accepting these as a part of the deal, the IWC report lists five ways to enhance the seat task business.
- Encourage purchase with miles/points and integrate assigned seats as a bonus offer
- Create a product by guaranteeing travelers will receive their assigned seat or get an automatic refund or equivalent
- Accommodate families by guaranteeing an adult and child will receive no-fee assigned seats within the booking path
- Simplify seat maps by marking each seat with a price that means value
- Reduce and simplify the principles and reduce complexity.
The IdeaWorksCompany reports are produced with the support of CarTrawler, a worldwide B2B provider of automotive rental and mobility solutions to the travel industry. CarTrawler’s technology platform expands ancillary revenue opportunities for airline and travel partners, including United Airlines, easyJet, Alaska Airlines, Emirates and American Express.
Do you pay for seat assignments? Tell us within the comments.
Source: IdeaWorksCompany