Another year has, ahem, flown by.
In reviewing the past year in the travel world, the challenge isn’t so much finding stories that deserve a moment’s recollection and reflection. Rather, it’s culling a few representative events or developments from the torrent of news bits and bites we’ve been inundated with over the past 12 months.
Following are five items from my files that strike me as particularly indicative of the year itself, or especially suggestive of what might lie ahead.
1. Southwest abandoned its roots
Southwest was in the spotlight for much of this year, applauded as the company with the prescience to buy jet fuel at pre-negotiated prices, leaving it with low fuel costs when the price of a barrel of crude soared to $147 over the summer. As most airlines struggled to keep their unhedged fuel costs from dragging them into bankruptcy, Southwest flew above the financial turbulence. (When fuel prices plunged, the hedging had the opposite effect, pushing Southwest into its first quarterly loss in 17 years.)
More significant, both for the traveling public and for the industry, has been Southwest’s move to extend beyond its traditional base of leisure travelers. The lure of the business-traveler market—small but highly profitable—finally proved irresistible.
But with mainline carriers offering business travelers upgrades to first class, access to airport lounges, and heaps of bonus miles, Southwest’s longstanding focus on low prices and cheerfully bare-bones service wasn’t winning over road warriors. Southwest had neither first-class seats nor airport lounges to attract pampered fliers accustomed to such perks.
The discounter’s solution was to add an elite tier (A-List) to its Rapid Rewards program, and reward elite fliers with expedited security clearance and priority boarding.
Security clearance and flight boarding are both zero-sum games: Giving precedence to one customer necessarily means delaying someone else. And that flies in the face of Southwest’s egalitarian, one-size-fits-all approach.
Southwest isn’t alone in trying to be all things to all people, or an acceptable number of things to an adequate number of people. But Southwest’s case merits special attention because its identity is more firmly established than other carriers. And because of Southwest’s remarkable success in generating customer loyalty and profits, its example will be watched by all, and followed by at least a few. For better or for worse.
2. Virgin America almost got it right
Upstart Virgin America made a brash entrance onto the U.S. airline scene in 2007 with an approach that seemed to take the best features of JetBlue and amplify them. It had attitude and style. And low prices.
In particular, there was keen interest in Virgin’s loyalty program, Elevate, which the airline claimed was being designed from scratch, with a single-minded focus on the airline’s customers.
When the program was finally completed, in October of this year, it received mixed reviews. On the one hand, its “no blackout dates” policy and streamlined award booking application are praise-worthy. On the other hand, the program is hobbled by a lack of earning opportunities and points that expire after just 18 months.
While Elevate hasn’t been the breakthrough that some were anticipating, it does boast one characteristic that should be adopted industry wide: transparency.
Program members earn points according to the amount they spend on tickets. And on the redemption side of the program, any seat on any flight can be purchased with points, albeit at prices that vary directly with tickets’ dollar prices, which in turn vary according to supply and demand for particular flights.
Travelers have no trouble with the concept of getting what they pay for. While the Virgin program may not be the most generous, it at least establishes a clear relationship between a customer’s loyalty, as measured in dollars contributed to the airline, and his rewards, as measured by the dollar value of an award ticket.
3. Airlines contract fee fever
Since the advent of commercial aviation, there has never before been a year during which so many airlines imposed so many fees—so many in fact that I and my fellow editors at SmarterTravel.com felt duty-bound to create two separate fee charts, one for general travel fees and the other specifically related to frequent flier programs, to keep our readers apprised of who is charging whom, how much, and for what.
The frequent flier fee chart alone shows 11 fees assessed by 15 U.S. airlines, potentially 165 different fees.
As many fees as we’ve already seen, there are more to come. American has announced its intention to introduce a thoroughgoing makeover of its pricing in 2009, based on the a-la-carte model of charging separately for each and every aspect of the travel service. Frontier has done the same. And other carriers are doing so incrementally, adding one fee at a time.
Meanwhile, Southwest has elected to take the fee-free road, chiding other airlines for their nickel-and-diming ways. Which raises the question: Could Southwest, as the most consistently profitable U.S. airline and a competitive powerhouse to be reckoned with, force other carriers to back away from their a-la-carte pricing plans?
Nah. Unfortunately for consumers, this is one area where Southwest’s example isn’t likely to be emulated. The fee-for-all will be a fact of travel life for the foreseeable future.
4. Flip-flops and push-backs
There’s no official scorekeeper for such things, but 2008 will rate a prominent mention in my record book as a year of airline policy reversal: the Year of the Flip-Flop.
So furious was the policymaking and unmaking that in several cases, new policies were announced and then rescinded before they’d even gone into effect.
Continental, for example, announced in September that, effective next year, they would no longer award a minimum of 500 frequent flier miles for short-haul flights. But they have since reconsidered and modified the modification, reinstating minimum miles for its elite members.
Other flip-flops affected to the aforementioned fees.
In June, American went where no other airline had dared to go: It imposed a $5 fee to book a flight using frequent flier miles. From that moment, it was no longer possible to get a truly free ticket—the core promise of airline loyalty programs had been revoked. And because American’s moves are often copied by other airlines, frequent travelers fretted that such fees would become the new industry standard.
Indeed, US Airways and Frontier followed American’s lead, imposing award fees of their own. But then, in October, American quietly withdrew its award fee, apparently hoping no one would notice.
It’s been a year during which the airlines pushed consumers hard. In some cases consumers pushed back. And in a few cases, that pushback had the desired effect.
5. There’s a new sheriff in town
As the year comes to a close, I still find myself thinking of American as the world’s largest airline. Not so, I have to remind myself. With the Northwest merger finally consummated, the ‘largest’ title now belongs to Atlanta-based Delta.
An airline’s size wouldn’t normally bear mention—size has proven to correlate with neither quality nor innovation. Delta, however, at least in its loyalty marketing, has signaled that it intends to use the merger as an opportunity to reassess its mileage program, with the stated goal of refashioning it as “the world’s premier loyalty program.” And they appear to be acting on that promise.
During a year when the changes made by most carriers were overwhelmingly negative, the changes to Delta’s SkyMiles program have been either neutral or positive. If that trend continues, Delta could separate itself from the competition and have a legitimate claim to not only the largest mileage program, but the best.
That would mark an historic changing of the guard. For much of the 27-year history of airline loyalty programs, American was the innovator. Theirs was the first modern loyalty scheme, and for many years it set the standard for the industry.
We have now entered the Delta Decade. By the end of next year, we should have a better sense of what kind of a decade that will be.