The airline terms “legacy carrier” and “low cost carrier” could soon become legacies themselves – anachronisms from a time before 2013 when there really were distinctions between the two business models.
The ancillary revenue benefits associated with additional and unbundled services (baggage-checking fees being the most popular for airlines and unpopular for travelers) have proven essential to airline profitability. That’s why a growing number of legacy carriers are adopting LCC tactics out of competitive prudence. Meanwhile, LCCs are forging airline alliances that once were the sole province of legacy carriers. In fact, a recent KPMG study finds that the price difference between LCCs and legacy carriers has fallen 30% in the last six years. The question is, are customers happy with these changes? And is such a blurring ultimately sustainable?
In February 2013, British Airways became the first major European carrier to begin charging checked baggage fees on five routes from Gatwick including Amsterdam, Dubrovnik, Jersey, Tunis and Turin. For comparison, these routes are similar in distance to those from New York to Boston and New York to New Orleans and destinations in between, a range of roughly 185 to 1,035 miles, respectively. In March the program was expanded to 32 additional routes.
BA’s move follows similar “hybrid” announcements from other airlines like Jetstar Japan which expanded its codesharing and interline agreements with Japan Airlines. Codesharing – wherein airlines sell seats on other airlines in order to expand route service efficiency and reduce marketing costs – and interline agreements, which help travelers book multiple-leg trips on different carriers, have advanced airline “hybridization,” blurring the LCC/Legacy barrier even further.
The Cost of a Smooth Customer Experience
My take on all of this LCC/Legacy fusion? While customers are indeed price-sensitive and survey data shows price point as a critical aspect of purchasing decisions, it’s far from the whole story. In fact, according to TripAdvisor’s annual study, released in February, uncomfortable seats and limited leg room were the top traveler complaints. Costly airline fees and ticket prices ranked second. But neither is it right to conclude travelers will summarily dismiss a carrier, like BA, for what they will likely see as a new slap-in-the-face nickel-and-dime pricing scheme.
More important than extra fees, however, is how those fees are implemented, as well as the overall passenger experience. On this front most airlines perform poorly – especially as compared to other industries. According to the 2013 Tempkin Experience Ratings report, which ranked the customer experience of 246 companies across 19 industries, the airline business landed 15 out of 19, performing better than “TV Service Providers” but worse than car dealers. Come on, worse than a guy claiming he will “pay off your trade no matter what you owe”, that actually puts airlines firmly in scam territory.
Comparing apples to apples:
- LCCs outperformed Legacies by notable margins.
- Of the best airlines ranked, four of the top five – Alaska Airlines, Southwest, Air Tran and JetBlue – are LCCs.
- Mind you, it was LCCs like RyanAir , not Legacies, that pioneered the ancillary revenue windfall back in 2001.
So, if unbundled fees aren’t the real problem facing airlines, what is?
Customer service. And I’m not talking about what should be the obvious basics: low to very low lost baggage rates, high on-time percentages, the ability to speak to a human being when travel plans get bumpy and few, if any, headline-grabbing disasters. I’m talking about the growing list of experience-driven extras. Travelers will be more inclined to pay for in-flight and at-gate services like Wi-Fi, drinks and meals, gaming and access to onboard shopping portals if these services are delivered in a friendly and efficient, explanatory manner.
Dialing Down the BS
That said, checked baggage fees (and carry-on baggage fees) might always be the most hated passenger ancillary revenue add-on. But even here, a plain and transparent explanation by the airline adopting such measures might go a long way in mitigating flier frustrations. Unfortunately, British Airways, by having the chutzpah to announce “hand baggage only” fares, is wordsmithing the obvious: carry-on bags are still free but checked luggage is not.
That’s not exactly a discounted fare as I see it, though BA is trying to spin it as such.
Somehow I think passengers from both sides of the pond are much smarter than that. They’ll read through this nickel–and-diming scheme and call it what it is: crap.
That’s unfortunate, because British Airways, long known for strong customer service, has good reason to incentivize travelers packing less. Reduced bag weight cuts overall airplane weight and saves fuel. It also lowers the chance of lost luggage if fewer bags are being stowed to begin with. Airports may be able to streamline these services and the number of bag handlers, another savings, and so on.
Thus, navigating the customer conundrum requires smart service and customer experience policies just as it does smart prices. Otherwise, passengers will continue flocking to the Alaska Airlines, Southwests and JetBlues of the industry. They may not be as “low cost” as their name implies, with a host of ancillary extras. But as least they make these fees well known and don’t circle around the issue. Ultimately, LCC and Legacy distinctions aren’t that important – provided the services, both tangible and subjective, are the same.
So tell me what you think. Is BA’s plan a good move for ancillary revenue generation and passenger satisfaction? And is the blurring of Legacy and LCC distinctions really that important provided fliers still get where they want to go in reasonable style and comfort and don’t feel like they’re straphangers herded onto a flying rush-hour train?