A new trend being seen in airlines overseas resembles that of eBay for first class or business-class seats. As we all know, the price of airline tickets are not cheap and therefore, it is normal for many customers to automatically choose a coach ticket when flying. Airlines realized this was not giving them their most potential profits and looked for a way to fix it. As learned in class, in order to succeed, you have to continually look at the systems you are working with, and learn how to improve and be the best that you can. Airlines overseas, such as Air New Zealand, Virgin Atlantic, Brussels Airlines and CopaAirlines, realized this airline eBay and saw it as a potential to improve their company.
A company in New York has developed a system that essentially gives customers the opportunity to have “bidding wars” with one another in order to upgrade their seats. Once you purchase a coach seat, the airline will then allow you the opportunity to bid on an available upgraded seat. You will be given a minimum amount that you can offer in your bid, and then you decide the amount you would be willing to pay. If customers choose to participate in this auction process and end up with the highest bidding amount, the airline contacts them 48 hours before their flight and notifies them they had the winning amount and will receive the upgrade.
The decision to implement this newly developed system is turning out to be very profitable for the airlines. This eBay style system is not only saving customers hundreds to thousands of dollars due to not having to pay full price for first class seats, but it is also generating a good amount of revenue for the airlines. It has given them an opportunity to receive money for seats that weren’t originally selling at all.
While this system has seen many positive outcomes, there are a few worries airlines are having with it. Airlines are seeing that their loyal and frequent flyers, that are normally offered these available upgraded seats, are complaining they will no longer receive this. Airlines, therefore, have to come up with a solution that balances opportunities for frequent flyers and opportunities for flyers using the bidding process. Airlines do not want to implement a system that benefits half of their customers, but enrages the other half.
Do you think airlines will be able to come up with a balance between frequent flyers and flyers using the bidding process? Do you think this airline eBay will be something that continues to grow? Is it something that only overseas airlines will grab onto, or do you see this system succeeding in the U.S. as well?
Video – http://live.wsj.com/video/airline-ebay-for-first-class/56E98E77-CDB9-4742-862A-E7751DDCDAC6.html?mod=WSJ_article_outbrain&obref=obnetwork#!56E98E77-CDB9-4742-862A-E7751DDCDAC6
Picture: Etihad Airways – http://society.ezinemark.com/best-first-class-airline-seats-worldwide-77365a7d46da.html
4 thoughts on “Want a “bidding war” for your First Class Seat?”
I believe this is a very interesting idea and I feel like it will turn out to be very successful for airlines companies that attempt it. As you said yourself, it seems like both the consumers and the airlines are winning. In order to come up with a balance between frequent flyers and flyers that use the bidding process I believe that a certain amount of seats has to be allocated for each party. The split of the seats can be determined by each individual air company as to what is most efficient. At this point the competition is likely aware of this new strategy and will study it closely to determine how successful it is in the long run. If profits keep increasing over the next consecutive months, I believe that more and more companies will implement a similar eBay bidding process in their first class/business seat upgrades.
To ensure this process from becoming an entirely capitalistic procedure, I think airlines do need to implement a way that accommodates both frequent flyers and bidders. I am sure the richest customers have no problems placing the highest bids but that becomes a culture of only the wealthy dominating the best product or service that the airlines have to offer. And it deters from their loyal customers from experiencing the airlines’ best services. What the airlines can do is give first priority to frequent flyer members and then open up the bidding to the general public.
It is a great and a profitable idea for the customers as well as the airline. It benefits both of them. Flying Business class is a great experience, i have travelled in couple of times and I really cherish that moment. Whereas, the airline corporation are getting something rather than nothing, if they do not go through this bidding war process.
To maintain the balance between Frequent Flyers and these Bidders is important because these flyers are your long term payers, you surely do not want to tick them off. But the bidding opens new doors for these airlines. The solution i can come up with reduce the reminder time from 48 hours to 24 hours. Give the Frequent Flyers Priority over these bidders. If the Flyers do not want the upgrade before 24 hours the seat would be given to the person who has won the bid. I am sure it will help them make more revenue and profit.
Great article Jennifer.
I think the airlines will be able to come up with a balance between frequent flyers and flyers using the bidding process. As we learned in class, airlines may use forecasting to approximate the amount of frequent flyers that actually takes advantage of these upgraded seats and the percentage of consumers that will actually use the bidding method. With the forecasted amounts the airlines may retain a certain portion of seats for the frequent flyers and leaving the rest for the bidding flyers. Or as spr1333rmortha and spr1331pahuja has suggested, the airlines may give the frequent flyers priority to those upgraded seats first and then giving it to the winning bidders. I think that this system will be assimilated into the U.S. once it is more developed.