By: Jeremy Herskowitz | Business  | 

Budget Flying’s Continues to Change Airline Industry

Despite all the technological advances in the recent decades one thing has remained unchanged--it still takes six hours to fly from the East Coast to the West Coast, three hours to fly to Miami, and half a day to fly to Israel. While, flight times haven’t changed, the quality of service consumers’ experience is undergoing its biggest shakeup in air travel history. With the rapid rise of low-cost carriers both domestically and internationally, the “Big 3” US carriers - United, American and Delta -  have been forced to rethink their approach, focusing on both the elite and budget travelers.

Budget airlines like Frontier, Spirit, and Southwest have been transforming domestic travel in the past two decades. In the late 2000’s when the “Big 3” began to charge customers to bring a suitcase on domestic flights, the public reaction was extremely negative. Nevertheless, given the growth of budget airlines in the past few years and their incredibly low fares, the “Big 3” have introduced a new fare class called “Basic Economy”. Now, not only do customers have to pay a fee if they wish to check a suitcase, but a fee is also assessed if customers wish to bring a full-size carry-on or choose a seat when booking their tickets. Perhaps the biggest drawback of all is that flyers who book a Basic Economy ticket will not benefit from earning qualifying miles or qualifying dollars that entitle them to reach elite status on that airline for the following year. While Basic Economy isn’t the most viable option for a family vacation, the new fare class has made travel for students and those on a tight budget an option that hasn’t been available in the past.

“Budget airlines like Frontier, Spirit, and Southwest have been transforming domestic travel in the past two decades.”

Internationally, airlines like Wow Air and Norwegian offer consumers flights to Europe for as low as $99. Given the ridiculously low fares that these airlines offer, it’s incredibly difficult for major carriers like the “Big 3” to compete for the economy passengers who tend chose the lowest fare available over their airline of choice.

As a result, these major carriers are instead shifting their international focus to elite business passengers. The airlines are redesigning their premium cabins to lure in high paying customers, a lucrative business model for the major airlines. According to Investopedia, business-class travelers account for 12% of passengers, but they are twice as profitable for the airlines. On some flights business-class passengers account for 75% of the airlines’ profits. United Airlines is currently undergoing a major rebranding of their business-class cabin as a result of this, shifting away from the previously titled United BusinessFirst – a rather basic premium cabin- to what they are calling Polaris. This rebranding effort includes a major redesign of the cabin to include suite-like seats, as well as luxury in-flight amenities courtesy of United’s new partnerships with high end brands like Saks Fifth Avenue and Cowshed. United is also launching brand new Polaris lounges at United’s major hubs – Chicago, Newark, Houston etc.- exclusively for those traveling on their new Polaris product, making travel for those passengers as luxurious as ever. Delta is also improving their product with a new cabin titled Delta One which also includes suite-like seats among other luxurious amenities expected to enter service on their new Airbus A350 and Boeing 777s in the very near future.

All the changes coming to airlines are resulting in a sizeable uptick in destinations being serviced, and customers are responding accordingly, flying more than ever before. A recent report released by IATA (International Air Transport Association) expects planes to be more crowded in 2018 than they have been in the past. Industry-wide net profit is expected to rise to $38.4B from a previously forecasted $34.5B while the percentage of seats filled by passengers is expected to reach record levels of approximately 81.4%. While all this bodes well for airlines’ profitability, one thing that does not is the recent rise in airline jet fuel prices.  United projects that the price they pay per gallon will rise to $2.11 from $1.71 just one-year ago. Nevertheless, the future looks optimistic for the airline industry as airlines revamp their products to appeal to the high demand of travelers.

Business is booming for the airline industry as passengers are flying more often, more comfortably and for lower prices than ever before. Even though airlines like Spirit and Frontier have reputations for terrible customer service, their impact on the industry as a whole has resulted in enormous changes that are long overdue from a service that hasn’t adapted to consumers’ needs since its inception.