The low cost model of airline competition has become widespread in countries throughout the world. Traditional full service carriers (FSCs) have found it difficult to compete with these low-cost and ‘no frill’ competitors. Some of the FSC airlines have attempted to create subsidiary lower cost airlines, such as BMIBaby and Virgin Express for example. Air Canada has pioneered a different way to compete, perhaps this could be a model for future airlines to adopt?
Air Canada is offering fares which can be directly influenced by the actions of the customer - for example a customer can choose to travel light by leaving a suitcase at home and then benefit from a lower ticket price. Alternatively individual customers can now purchase flights ‘in bulk’ on a 12-month contract, and benefit from no cancellation / change fees and can book with only 1 hour to go before the flight time.
As an example, Tom Burke, as reported in USA Today, booked $6,858 worth of flights that can be taken at any time in the following 12 month period between many US and Canadian destinations. Burke benefits from free business class upgrades, together with the benefits mentioned above.
Air Canada is the 13th largest airline in the world, and this focus on customers rather than ‘no frills’ may represent a more convenient mode of air travel for a certain demographics of passengers. I imagine the booking and cancellation freedom that the bulk air ticket purchasing offers would benefit business passengers significantly, as meetings become rescheduled or cancelled.
It is said that other airlines are reluctant to follow to avoid the ‘herd mentality’ - in other words, using their oligopoly power. It would be great to see a UK airline adopt similar pricing strategies, rather than the dualistic ‘full frills’ and ‘no frills’ approach.
Source: USA Today http://www.usatoday.com/money/industries/travel/2007-05-07-air-canada-usat_N.htm