Basic economy set to become the norm as more airlines adopt budget model

TO face off competition from low-cost carriers, more legacy airlines are rebranding their economy class. Basic economy, as different from the normal economy, looks set to be the mode of travel for many of its customers.

This has been introduced for quite some time now in the United States, and by other carriers for the long haul including Cathay Pacific nad Singapore Airlines. In some way, many other carriers are already taking steps in the same direction as they begin to adopt the budget model of charging additionally for services now considered as ancillaries, such as checked baggage, seat selection and meals.

Courtesy British Airways

British Airways, which has since done away with complementary in-flight meals and is implementing non-reclining seats in the economy cabin, has announced it will be offering basic economy for the long haul from April 2018. Passengers will not be able to pre-select seats at the time pf booking, and checked baggage is subject to a fee. The fare is expected to be some 10 to 20 per cent less than the normal economy.

It goes to show how the threat by low-cost operators isn’t something that legacy airlines can dismiss as easily as it was once thought as they continue to feel the squeeze of the competition.

Over the years, the class configuration of air travel has evolved from a single luxury class to a two-class of first and economy to a three-class division to include a business class, which, when first introduced, was dismissed as redundant by then successful airlines such as Swissair.

In the same way, the budget model was viewed by legacy airlines as a non-threat because they catered to a different market, which today proves to be not entirely the case.

The blip in the global economy that caused a decline in the demand for premium travel led to a new economy subclass of premium economy, which again was initially scoffed by some airlines including Singapore Airlines, which today is aggressively promoting it. Premium economy is increasingly taking on an identity of its own, and may well be considered a fourth class in its own right, squeezed between business and economy, in the gamut of classes.

Now comes basic economy, and you wonder where the normal economy is heading.


Legacy airlines go the budget way

It’s yet another sign of how legacy airlines are feeling the heat of the competition posed by budget carriers.

Courtesy Getty Images

British Airways (BA) will operate planes for the short haul with seats in economy that cannot recline. The airline said the seats will be “pre-reclined at a comfortable angle”. Affected flights up to four hours include runs from Heathrow to Rome, Madrid and Paris.

BA which already ceased providing complimentary booze and meals for the short haul last year admitted to the pressure. It said the move will allow the airline to “be more competitive” as it will then be able to “offer more low fares”.

Many legacy airlines are already adopting the “pay for what you want” model of budget carriers, charging for extras such as checked luggage and seat selection at booking.

The big three US carriers of American, United and Delta have introduced “basic economy” fares which will board such ticket holders last with seat assignment only at boarding. There may be other restrictions.

Asian rivals Cathay Pacific and Singapore Airlines (SIA) are also moving in the same direction. Cathay’s economy supersaver and SIA’s economy lite do not permit seat selection at booking and do not accrue full mileage perks. SIA is also charging additionally a credit card service fee for tickets purchased out of certain ports. (See Same class, different fare conditions, Jan 5, 2018)

While legacy airlines are finding ways to cut costs to offer lower fares, this can be a double-edged sword that only serves to narrow the gap between them and budget carriers. What price, therefore, the differentiation? But, good news for travellers not too fussy about brands.

Benefits come with a price, so British Airways is boarding cheap fares last

Gate boarding procedures vary across the industry, from an open system of “anyone can board at any time” to specific policies that assign the order of who get on first. This only becomes an issue with economy passengers as premium classes as has been their privilege may board on their own time.

Because of limited overhead bin space, economy passengers may compete to board early. Traditionally most airlines board passengers from the rear so as to avoid bottlenecks in the aisle. The idea is to hasten the process that may cause a delay in take-off if it becomes problematic. From the perspective of efficiency, that seems to make a lot of sense.

Courtesy British Airways

That, until some airlines hit on the opportunity to make boarding a benefit to be purchased in a bucket of ancilliary charges. Now British Airways (BA) has announced that it will board passengers who have paid cheaper economy fares last. BA said the new procedures aim to “speed up the process and make it simpler for customers to understand.” Really? That’s a hard pill to swallow.

BA’s defence is that this is already a procedure practised by some other carriers. Yes, US carriers such as the Big Three of American, United and Delta have introduced basic economy fares – their version of budget fare to counter the no-frills competition – which do just that besides other non-entitlements such as no seat assignment until boarding at the gate.

But there is one difference – passengers are made aware of that sub-class before they amke the choice. However, most airlines sell different fares for the same economy seats, designed to help them sell the seats. One wonders if you purchase a ticket during a promotion period and become committed to flying maybe a year later, will you now be penalised for not paying a higher fare that is usually the case closer to the date of the flight? It is only fair that customers know and understand what they are paying for.

Of course, BA’s new procedures have already raised a lot of ire among its customers. Some of them feel that while they may have purchased cheap fares, they do not deserve to be made to feel cheap or to be treated as such. Oh well, as some people may say, you have the choice. Or, take it with a pinch of salt as Banjobob@scottishcringe says: “Nothing quite like a British class system to let you know your place!” Or, punch back with a new challenge, as Martin Lovatt wrote on Twitter: “I wonder if disembarkation will be in the reverse order then?” Now, that will be quite a task managing the process in economy based on fare.

What defines a best airline?

What defines a best airline, considering the different surveys that rank them? Conde Nast Travel has just released its readers’ choice of the best in 2017, and it is no surprise the list is made up of Asian, Middle East, European and SW Pacific carriers.

Courtesy Air New Zealand

Of course, it depends on the readership, but recognizing that, it also points to what really makes these airlines stand out. It is clear that the premium class service weighs heavily – the seat comfort and the fine food.

Etihad Airways (ranked #16) offers “the future of first-class comfort: a three-room “residence” with a bedroom, private bath with shower, and lounge.” Emirates (#4) offers “posh perks for premium fliers – cocktail lounges, in-flight showers… part of the reason it scores so high among travellers.” And the suites on Singapore Airlines (#3) offer “a pair of fully flat recliners that can be combined into a double bed.”

Mention is made of the premium economy class in almost all the ranked airlines” KLM (#20), Lufthansa (#19), Japan Airlines (#17), All Nippon Airways (#13), Qantas (#12), Cathay Pacific (#10), Virgin Atlantic (#7), Virgin Australia (#6), Singapore Airlines (#3) and Air New Zealand (#1).

So it may appear to be the voice of the premium travellers that is being heard. Maybe coach travellers aren’t too concerned about the ranking, more driven by price and less frilly factors, although to be fair, the Conde Nast report did mention of at least one airline, i.e. Etihad Airways (#16), not ignoring “those sitting in the back.” While many travellers may resign to the belief that the economy class is about the same across the industry, it is reasonable to assume that an airline that strives to please its customers in the front cabins will most probably carry that culture or at least part of it to the rear.

Although you may draw consensus across many of the surveys, it is best best to treat each one of them in isolation. It is more meaningful to try and draw intra conclusions within the findings of the particular survey.

You will note in the Conde Nast findings, there is an absence of American (including Canadian) carriers, never mind that of African and South American carriers.

Asiana Airlines (#8) is ranked ahead of Korean Air (#11).

All Nippon Airways (#13) is ranked ahead of Japan Airlines (#17). V

Virgin Australia (#6) is ranked ahead of Qantas (#12).

The order of the “Big 3” Gulf carriers is as follows: Qatar Airways (#2), Emirates (#4) and Etihad Airways (#16).

Of European carriers, there is the conspicuous absence of the big names of British Airways (compare Virgin Atlantic #7) and Air France, and the pleasant surprise of Aegean Airlines (#9) while SWISS seems to be regaining its erstwhile status years ago as being the industry standard.

The best belongs to Air New Zealand as the quiet achiever.

Ultimately, the results also depend on the group of respondents whose experiences may be limited to certain airlines.

Other airlines ranked in the top 20 of the Conde Nast survey: Finnair (#14), Turkish Airlines (#15), EVA Air (#18).

Star power in British Airways’ new safety video

Ever since Air New Zealand (Air NZ) made the bold move to ditch the traditional safety video format for something more entertaining, some airlines have followed suit to be different. It started with the objective to arrest the attention of passengers who would otherwise be disinterested. It has certainly become a talking point that raises the profile of the airline – for as long as the script remains topical and appealing.

The pertinent question is at what point the new video ceases to be a safety demo and becomes pure entertainment with a life of its own. That depends on how well the safety message still comes through taken out of the normal environment of the aircraft. And when the production tries to do more than just educate and entertain but advertise or sell a third product, things can get pretty muddled up as in the case of a joint promotion by Qantas and Australian Tourism.

Courtesy British Airways

What appeals to the passengers? A good story or a favorite movie recall such as Air NZ’s adoption of the Lord of the Rings’ Middle Earth. Or, popular personalities, particularly movie idols, as British Airways (BA) has done with a new star-powered video to be launched in September. It features Chiwetel Ejiofor, Gordon Ramsay, Thandie Newton, Ian McKellen, Jim Broadbent and Gillian Anderson among others, not forgetting, of course, Rowan Atkinson aka Mr Bean! It is clearly British humor, and to the production’s credit, executed without shadowing the safety message.

BA chairman and CEO Alex Cruz said: “It’s extremely important to us that customers engage with our safety video, and involving some of the nation’s most well-know personalities has given us the chance to create something fun that we hope people will watch from start to finish – and remember.”

However, the old format, dull as it is, never gets out of date whereas the new format needs to keep up with the times to sustain the excitement. While many would just do something else instead of watching the old video, equally many others may sigh “not again” if the newly formatted version becomes an over-shown re-run. Passengers will therefore expect seasonal changes. Well, at least that’s something to look forward to.

Air France to “boost” performance with new low-cost carrier

Legacy airlines in Europe have long been feeling the pinch from low-cost carriers such as Ryanair and Easyjet. Now it looks like Norwegian Air Shuttle and WOW Air are pushing them to look farther before they lose more ground.
Lufthansa already offers a low-cost trans-Atlantic option from Europe to Las Vegas, Orlando, Miami and Seattle in the United States.

The International Airlines Group which owns British Airways, Iberia, Aer Lingusm and Vueling has just added another low-cost carrier – Level – to its stable. Level, based in Barcelona, will fly to Los Angeles and Oakland in California USA, Punta Cana in the Dominican Republic, and Buenos Aires in Argentina. Fares start at the familiar €99 reminiscent of the Norwegian and WOW Air’s promotions.

Courtesy Air France

Following in their footsteps is Air France, which announces the formation of a new subsidiary low-cost airline – Boost as its working name – planned to commence operations in winter. The airline will fly from the main hubs of the Air France/KLM group to destinations in Italy, Spain and Turkey initially, and then farther to destinations in Asia. Norwegian is already flying to Bangkok and will in October connect London with Singapore.

But Boost will be taking on full-service airlines as well, such as the Middle East carriers of Emirates Airlines, Etihad Airways and Qatar Airways which are already ruffling the feathers of the regional big birds of Singapore Airlines and Cathay Pacific.

The developments point to a gradual convergence of the low-cost and full-service product perceived value wise. It’s the antithetical success of low-cost carriers pushing to bridge the gulf and the failure of legacy airlines not being able to maintain if not increase the differentiation. It looks like the European tug-of-war is pulling the legacy airlines towards the centre line.

Rising budget tide: Alitalia unbundles, IAG launches budget long-haul

Courtesy Getty Images

YET another legacy airline is going budget. Italian flag carrier Alitalia will adopt the unbundling model of budget carriers by charging for what will now be considered perks – seat selection, luggage and in-flight meals and drinks. This will be implemented for flights of four hours or less.

Alitalia CEO Cramer Ball said the airline had “absolutely no alternative” but to follow suit, coming soon after British Airways started charging for meals. He said: “If we can’t compete throughout Italy and Europe against low-cost carriers, then we lose air travellers that connect into intercontinental flights.”

Ryanair, EasyJet, Norwegian Air Shuttle, WOW Air, Eurowings (owned by Lufthansa) and Vueling (owned by International Airlines Group – IAG – which also owns British Airways, Iberia and Aer Lingus) are among the budget carriers viewed as close competitors.

Unbundling is not new even among legacy airlines. US carriers such as Delta Air Lines and United Airlines are already offering “basic economy” whose low fare does not come with cabin baggage allowance and seat selection, and holders of such tickets will be boarded last.

Courtesy IAG

In the wake of the rising budget tide, IAG announces its decision to launch a long-haul budget carrier – Level – to complement Veuling’s short-haul. Level, which becomes the fifth brand within the group, will be based in Barcelona with flights to the Americas that include destinations such as Los Angeles, Oakland, Buenos Aires and Punta Cana.

IAG chief executive Willie Walsh said: “Barcelona is Vueling’s home base and this will allow customers to connect from Vueling’s extensive European network onto Level’s long-haul flights.”

Clearly, legacy airlines can no longer hide behind their pride of providing a service that is safe from the aggression of budget carriers. It is up to the consumers to decide, whether the extra dollars charged justify the perceived better standards. In today’s price-sensitive market, the bottom-line counts, and legacy airlines unbunding the fare package will make an easier comparison.

They will be faced with the challenge to convince the travellers of that something extra over and above price that they will continue to provide but which budget carriers may not have the capability or capacity to offer, such as mileage perks, compensation for flight delays and product shortcomings, ease of booking, schedule flexibility, and after-sale customer attention.

Many budget carriers, for example, do not have adequate Plan B when a flight is cancelled or delayed, and your chances of getting out of that situation soonest is better with legacy airlines in light of their frequency, connections and codeshare arrangements.