Why waiting is not an option for airlines
Aviation is a risk-adverse industry, one where being the first to do something is often seen as dangerous. This makes a lot of sense when it comes to safety and making people fly, and sometimes it has also made sense for commercial strategies.
After all, even when some airlines started to unbundle their fares and change the way tickets were sold, other airlines were able to copy and even learn from the mistakes made by early adopters.
This time, the game is different
The strategy worked well across industries because customers tend to shop around before each purchase, greatly reducing the effect of the “first mover advantage”. This time, something is different.
A new sales strategy has come about that effectively locks some customers out of the market and making them unreachable by competitors, regardless of the fares or incentives that they might use.
With this strategy, companies that move first are the first to capture costumers, leaving competitors with a reduced pool of potential customers.
Shopping around no more
We are talking, of course, about subscriptions, a trend that has already claimed many illustrious victims across industries and that is gaining traction in aviation.
It is a game changer because, for the first time, companies can make travelers bypass the price comparisons and fare-wars that drive so much of airline commoditization and lock in customers in an exclusive relationship.
For airlines, this means an increase in revenue between 1 and 2 %, plus a significant reduction in marketing costs and a marked improvement in customer experience during the booking process. For customers, it means lower prices and less time wasted shopping around for flights.
Where is the extra money coming from?
Yes, you read that right. Flight subscriptions can simultaneously make more money for an airline and lower price for consumers. The reason is simple, airlines are able to offer competitive prices and increase revenue because there is extra money coming into the equation.
This money comes from an increase in the total lifetime value of the customer, driven by in part by flights that would have been taken with a competitor and in part from disposable income that would not have otherwise been used for flights.
Why traditional sales are here to stay
This extra revenue and lower cost that can be captured by airlines flight subscription programs can be a game changer for an industry used to razor-thin margins, giving airlines more room to outmaneuver cash-strapped competitors.
Or, in other words, flight subscriptions will become a must-have for airlines, not because they will fully replace traditional sales, but because the competitive advantages they deliver cannot be ignored.
The challenge, as we have seen earlier, will be moving fast enough. Airlines that move fast will take the majority of the pie, locking in customers in their programs and getting additional revenue that has already proven to be stable and reliable even during crises like Covid-19.
Those that wait or try to do things in-house will be relegated to fight for the leftovers of early adopters and find themselves with lower operating margins and less room to maneuver.
How to get started now
Caravelo is currently the only company in the world with experience and a proven track record of launching flight subscriptions. We help clients understand the business model, help them design their programs and give them access to the technology.
We already have several active clients at the moment, and a number of airlines will launch their subscription with us in the coming months. If you’d like to be one of the leaders that leads the way, reach out to us now by emailing firstname.lastname@example.org or using our contact form.