- Nov 9, 2003
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Low-Cost Carriers Bank on Upscale Cabins
Aviation Week & Space Technology
03/22/2004, page 47
James Ott
Indianapolis
New competitive tool for low-cost carriers promises bottom-line gains
Upscale Cabins
Low-cost carriers are adopting the upscale front cabin as a new tool to compete against network airlines. The trend toward business and first class is offering more than greater passenger comfort--it promises a new way to boost profits.
Business class at the discounters is modified in style and in cost compared with the traditional version. The service tends to focus on a wider seat than in coach. Snacks and beverages are somewhat improved. One can expect better treatment such as "first on and first off."
It's unlikely a discount up-front passenger will be served a jumbo shrimp cocktail; no white tablecloths, crystal or exclusive china, either.
ATA Airlines is the latest carrier to join the trend. The one-time charter operator will offer business class this fall, representing another seismic shift since it was propelled into the ranks of the U.S. majors on the discount trend.
ATA's studies indicate the new service will swell the airline's revenues by several million dollars a year after costs, said John B. Happ, senior vice president for marketing and sales. Officials of other carriers already offering upscale cabins agree.
"Most all goes to the bottom line," said Steven Hendrickson, a senior partner with Sabre Airline Solutions of Dallas. "There's little incremental expense after the one-time reconfiguration cost. There are drinks and upgraded snacks but not a whole new catering division with crystal and champagne."
Hendrickson conducted ATA's passenger surveys, helping to make the case that eventually was approved by the board of directors. "You are basically trading real estate from the back of the bus for a higher value product in front," the consultant said. Sabre has performed similar studies for AirTran Airways, which launched business class in 1997, and more recently for America West Airlines, Spirit Airlines and Sun Country Airlines.
Each of the low-cost carriers is currently fine-tuning its upscale cabins. AirTran is configuring its incoming Boeing 737-800s with German-made Recaro leather seats. America West recently unveiled a nonrefundable first-class fare that falls well below traditional first-cabin fares, with deepest discounts available on day of departure. Spirit Airlines is reconfiguring MD-80s to expand its Spirit Plus to 16 seats from 12 in two-by-two rows. Sun Country is expanding its first-class compartments in Boeing 737-800s to 12 seats from eight.
Spirit Airlines is expanding its Spirit Plus cabin to 16 seats from 12. Upgrades are usually available on day of departure.
Hendrickson said the improved cabin service attracts that group of travelers who would not fly an all-coach low-fare carrier and who are willing to pay a somewhat higher fare for the extra space. The emphasis at the low-costs continues to focus on maintaining the "value" for which they are known, only in this case the product is upgraded service, he said.
Offering upscale cabins as a lure to business travelers is another element of the intensifying rivalry between the low-costs and network airlines. The competition is thought to be a do-or-die battle that will reshape the U.S. industry (AW&ST Dec. 22, 2003, p. 50).
At ATA, the new service will demonstrate "that we are now serious about business travel," said George Mikelsons, chairman/CEO of ATA and founder of the 30-year-old carrier once known as American Trans Air. The change in thinking from strictly a low-fare model is an outgrowth of the $1-billion fleet renewal program. In 2000, ATA ordered 39 Boeing 737-800s and 10 757-300s. As the new aircraft were delivered, ATA's capacity has grown rapidly--23% in 2003 over 2002. It opened dozens of new business markets from its Chicago Midway Airport hub and launched transcontinental flights and new services to Hawaii, the Caribbean and Mexico.
ATA Airlines will begin reconfiguring its 60 transports in two-class configuration in early August. New seats will be provided by Weber Aircraft.Credit: ERIK SIMONSEN
ATA's move to an upscale cabin is timely because the economy is improving, Hendrickson says, and it's also fitting since ATA has evolved into a long-haul scheduled carrier. In 2003, its average stage length approached 1,300 mi., compared with an average of 744 mi. for Air Transport Assn. of America member carriers.
Front cabin seating is desirable on long flights, and passengers are more willing to pay for the added comfort, the consultant said.
Studies on passenger preferences in 2003 came to the conclusion that low fares were important, said Happ, the marketing chief, but respondents typically asked, "Why not offer business class and adopt the same pricing philosophy?" That's what ATA plans to do, starting in late August when the first reconfigured aircraft, a 737-800, will be ready. The reconfiguration of 32 737-800s, 12 757-300s and 16 757-200s will be completed by mid-November. Each will be outfitted with 12 business-class seats.
The price for the service will vary by market, no fare higher than a cap of $399 in domestic service. That price is $100 more than the cap for what a passenger pays for a coach seat. Passengers may upgrade on the day of departure for $40-50. The price is not firm as yet.
ATA recently signed a contract for seats with Weber Aircraft of Gainesville, Tex. The leather seats will be 21 in. wide, approximately 4 in. wider than the typical coach seat. Each row will feature seats in a two-by-two configuration, with 37-40-in. of pitch. They will have foot rests and six-way adjustable head rests.
Hendrickson said he expects the low-cost carriers "to stick to their knitting, keeping value for a reasonable amount. You can only squeeze costs down so far," he added, "and when you look to improve profitability, you turn your attention to the revenue side of the equation."
Aviation Week & Space Technology
03/22/2004, page 47
James Ott
Indianapolis
New competitive tool for low-cost carriers promises bottom-line gains
Upscale Cabins
Low-cost carriers are adopting the upscale front cabin as a new tool to compete against network airlines. The trend toward business and first class is offering more than greater passenger comfort--it promises a new way to boost profits.
Business class at the discounters is modified in style and in cost compared with the traditional version. The service tends to focus on a wider seat than in coach. Snacks and beverages are somewhat improved. One can expect better treatment such as "first on and first off."
It's unlikely a discount up-front passenger will be served a jumbo shrimp cocktail; no white tablecloths, crystal or exclusive china, either.
ATA Airlines is the latest carrier to join the trend. The one-time charter operator will offer business class this fall, representing another seismic shift since it was propelled into the ranks of the U.S. majors on the discount trend.
ATA's studies indicate the new service will swell the airline's revenues by several million dollars a year after costs, said John B. Happ, senior vice president for marketing and sales. Officials of other carriers already offering upscale cabins agree.
"Most all goes to the bottom line," said Steven Hendrickson, a senior partner with Sabre Airline Solutions of Dallas. "There's little incremental expense after the one-time reconfiguration cost. There are drinks and upgraded snacks but not a whole new catering division with crystal and champagne."
Hendrickson conducted ATA's passenger surveys, helping to make the case that eventually was approved by the board of directors. "You are basically trading real estate from the back of the bus for a higher value product in front," the consultant said. Sabre has performed similar studies for AirTran Airways, which launched business class in 1997, and more recently for America West Airlines, Spirit Airlines and Sun Country Airlines.
Each of the low-cost carriers is currently fine-tuning its upscale cabins. AirTran is configuring its incoming Boeing 737-800s with German-made Recaro leather seats. America West recently unveiled a nonrefundable first-class fare that falls well below traditional first-cabin fares, with deepest discounts available on day of departure. Spirit Airlines is reconfiguring MD-80s to expand its Spirit Plus to 16 seats from 12 in two-by-two rows. Sun Country is expanding its first-class compartments in Boeing 737-800s to 12 seats from eight.
Spirit Airlines is expanding its Spirit Plus cabin to 16 seats from 12. Upgrades are usually available on day of departure.
Hendrickson said the improved cabin service attracts that group of travelers who would not fly an all-coach low-fare carrier and who are willing to pay a somewhat higher fare for the extra space. The emphasis at the low-costs continues to focus on maintaining the "value" for which they are known, only in this case the product is upgraded service, he said.
Offering upscale cabins as a lure to business travelers is another element of the intensifying rivalry between the low-costs and network airlines. The competition is thought to be a do-or-die battle that will reshape the U.S. industry (AW&ST Dec. 22, 2003, p. 50).
At ATA, the new service will demonstrate "that we are now serious about business travel," said George Mikelsons, chairman/CEO of ATA and founder of the 30-year-old carrier once known as American Trans Air. The change in thinking from strictly a low-fare model is an outgrowth of the $1-billion fleet renewal program. In 2000, ATA ordered 39 Boeing 737-800s and 10 757-300s. As the new aircraft were delivered, ATA's capacity has grown rapidly--23% in 2003 over 2002. It opened dozens of new business markets from its Chicago Midway Airport hub and launched transcontinental flights and new services to Hawaii, the Caribbean and Mexico.
ATA Airlines will begin reconfiguring its 60 transports in two-class configuration in early August. New seats will be provided by Weber Aircraft.Credit: ERIK SIMONSEN
ATA's move to an upscale cabin is timely because the economy is improving, Hendrickson says, and it's also fitting since ATA has evolved into a long-haul scheduled carrier. In 2003, its average stage length approached 1,300 mi., compared with an average of 744 mi. for Air Transport Assn. of America member carriers.
Front cabin seating is desirable on long flights, and passengers are more willing to pay for the added comfort, the consultant said.
Studies on passenger preferences in 2003 came to the conclusion that low fares were important, said Happ, the marketing chief, but respondents typically asked, "Why not offer business class and adopt the same pricing philosophy?" That's what ATA plans to do, starting in late August when the first reconfigured aircraft, a 737-800, will be ready. The reconfiguration of 32 737-800s, 12 757-300s and 16 757-200s will be completed by mid-November. Each will be outfitted with 12 business-class seats.
The price for the service will vary by market, no fare higher than a cap of $399 in domestic service. That price is $100 more than the cap for what a passenger pays for a coach seat. Passengers may upgrade on the day of departure for $40-50. The price is not firm as yet.
ATA recently signed a contract for seats with Weber Aircraft of Gainesville, Tex. The leather seats will be 21 in. wide, approximately 4 in. wider than the typical coach seat. Each row will feature seats in a two-by-two configuration, with 37-40-in. of pitch. They will have foot rests and six-way adjustable head rests.
Hendrickson said he expects the low-cost carriers "to stick to their knitting, keeping value for a reasonable amount. You can only squeeze costs down so far," he added, "and when you look to improve profitability, you turn your attention to the revenue side of the equation."
