AA la Carte Pricing

AA la Carte Pricing

It’s all over the news, American Airlines is rumored to start a la carte pricing in 2009. The idea is to have a few basic fare plans and travelers can pick additional services for a fee, including services such as frequent flyer miles.

It looks as though all-inclusive fares may very well be a thing of the past, even if the cost of fuel decreases. “We as an industry have opted to not just raise (ticket) prices but to raise prices and change the fee structure,” said Daniel Garton, American Airlines’ executive vice president of marketing. Without fees to offset rising costs, “you’re not going to be talking about fees–you’re going to be talking about lost service … being able to have a flight to San Diego,” he said.

It’s early yet to know how American will implement al a carte pricing and which airlines will follow suit, but it looks like it’s a matter of when, not if.

John Tague, United Airlines’ chief operating officer was quoted in Travel Weekly, “We believe that these unbundling initiatives are resettling the value proposition for both non-elites and elites, giving price-sensitive customers new, relevant options to purchase the value they want while reinforcing our elite frequent flyer travelers with the value we place on their loyalty.” He goes on to say that he’s aware that some customers are frustrated with the fees, but says, “These are just things that are going to be necessary if we’re going to be a real industry.”

Air Canada was the first airline in North America to introduce “unbundling” pricing starting five years ago. Customers there have had the option to opt-out of earning frequent flyer miles, for example, for quite some time now.

Air Canada customers can choose from four different fare levels. The top two, called Latitude and Executive Class, offer priority check-in, food and other amenities. The lowest fare class, called Tango, requires extra fees for upgrades such as a food voucher, advance seat selection, flight changes and airport lounge access. And Tango passengers can save another $3 CAD by declining frequent flyer miles or not checking a bag. Half of Air Canada’s passengers pick an option higher than Tango and Air Canada executives say that a la carte pricing should be about transparency and customer choice, not simply revenue. The airline is being held up as an example of a good business model for the industry.

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