It's still early in the year, so I'm taking this opportunity to weigh in on some of the most talked about air travel predictions, including shifting competition, oil and airline ticket prices, changing loyalty programs and the pitfalls of new basic fares.
American Airlines' popularity among business travelers and how that will be effected by the upcoming changes to the AAdvantage Loyalty Program
In a recent poll among 1,500 of our top business traveler and frequent flyer subscribers and View from the Wing readers, we found that American Airlines was the overwhelming favorite among this demo of sophisticated travelers. We've been running ExpertFlyer for 11 years now, and in that time, we have seen that although travelers don't necessarily always love their frequent flyer programs, American's Advantage program was always the least disliked. We've seen that Advantage has always looked at their frequent flyers almost as partners, not a liability to be managed as some other airlines might. If you go onto the frequent flyer boards, like Mile Point, FlyerTalk or Traveling Better, you'll always see that people will have a visceral reaction to other frequent flyer programs, but not so much to Advantage. I think the goodwill that Advantage has built over the last 25 or more years has led to that. Now, all they have to do is not screw up and they win by default, as compared to what some of their competition might be doing.
AA recently announced changes that will happen later in the 2016 program year; they're not as bad as people may have predicted, not as good as some might have hoped, somewhere in the middle, maybe, in terms of what the impact and changes will be. We'll see what happens. As a point of comparison, I once spoke a few years ago to someone in the frequent flyer department of one of their competitors who point-blank said to me that they prefer that their elites not be able to use their elite benefits. When compared to something like that, I can understand why the elites of Advantage would be loyal to Advantage.
Low oil prices, flat fares & other contributors to increased air travel in 2016
Just because oil prices go down and airline profits go up, doesn't necessarily mean that they're going to pass it along to the consumer. Mainly because, if you look at the entire history of the airline industry, it really hasn't made much money, if at all. With every good year that the airline industry has had, there's been a bad year. Think about all the bankruptcies of airlines that exist and all the bankruptcies of airlines that don't exist anymore. It's a feast or famine industry, especially in the last 10-15 years or so. If I was an airline executive, I would hoard as much cash as possible in expectation that oil prices are going to shoot through the roof again.
That being said, the reason why prices have gone down a little bit is because the airlines are now adding more capacity because they're making a higher profit and oil prices are low. If you add capacity, it holds ticket prices so they don't go up too high or stay flat. It depends on the markets. In terms of travel trends for 2016, as long as the US economy holds, travel, especially business travel, should hold as well and increase through 2016.
New bargain basement ticket prices with severe restrictions may make such deals, deal-breakers
This new concept of bargain basement fares, which offers just a physical seat on the plane, is geared towards the most price-conscious of consumer and it's interesting how the airlines market lack of choice as a feature. For some travelers, that's fine. That's what they want. It works for them, they know exactly what they're going to take and they just want the cheapest way to get in the seat and that's fine.
Ultimately, if the airlines don't position it properly or try to use it as a way to lure people in, saying "This is the cheapest fare. Oh, but by the way..." then there's going to be backlash. They have to be careful to walk that line between offering this really bargain basement fare for those who may want it, but not pretending that that's a normal fare when doing price comparison. The airlines really don't like their product to be commoditized. In other words, they don't want everyone to think it's the same even though they all equally get you from point A to point B safely. In that respect, it is a commodity. Where they can differentiate is with what they call the "hard part." The seat, the Internet, the on-board experience. How nice it is. Do they give you a snack? Do they give you a soda? Things like that.
That's where this unbundling comes in where everything that used to be included, like snacks, blankets, a soda, being able to get the seat that you want at the time you're booking is now separate because they're making too much money with this unbundling now. With all that being said, that's why a service like ExpertFlyer is very useful because it gives that transparency that some airlines want to take away from their customers. We show all the published fares, we show what their rules are, what their restrictions are, and what their prices are, very simply, in an unbiased manner. In this way, you are empowered to know what the story is before you go to the airline website and book a ticket. We're not trying to take away the booking experience; we don't want to do that. We don't want to be a travel agent. We feel that, especially nowadays, having a source of unbiased information, especially with fares and seats, is so important to consumers.
What we can expect from air travel in 2016
I think we're going to see more airlines competing for the front of the cabin passengers. They put a lot of effort into making their business, first, and now business first, two separate things, and now premium economy products better. As a matter of fact, we heard an announcement from American Airlines not too long ago that they're going to be introducing a separate premium economy cabin on some of their international flights, which is a relative first. Usually, it's more of a section within economy. This is going to be interesting to watch. Hopefully, some of that trickles down to the back of the bus, where airlines realize that their economy passengers should be valued too and again, like I said before, compete on the hard product, not just make people feel like they're in a cattle car on the train.
There used to be six major US airlines not too long ago. Now we're down to four. There's less competition. They're making money; they're making a profit even if they don't try because the cost of oil is low. Like everything, it goes up and down. The party is not going to last forever. Those airlines that laid the groundwork now to treat their customers as partners and not as burdens, will reap benefits when things get tougher again and oil prices go up in the future. To the flying customers, I say, vote with your wallet. Send the message to the airlines that you want to be treated well no matter where you sit on the plane, and understand that the cheapest ticket doesn't necessarily offer the most value. Don't be afraid to vote with your wallet and to make your voices heard with the airlines.
Chris is the President and Co-Founder of ExpertFlyer.com, a service that helps travelers get out of the "Middle Seat" by providing in-depth flight info and alerts when Awards and Upgrades are available.