News today the WestJet has entered the Canadian pre-paid air pass fray, in the wake of Air Canada launching a major push for their smorgasbord of passes, which have actually been around for a while now. Lot's of coverage of these moves over the last while, especially since it marks AC's first big advertising push in many years, and the first move into this space for WS.
But hold up for juuuuust a second. Despite all the gushy commentary, it's not like this idea is new. Hardly. It's been around for as long as airline bankruptcy (read: a long time). But in this case, that actually doesn't make it a bad idea.
But first, a brief walk down memory lane. Passes are a tried and true, though usually last-ditch, airline sales tactic. Some might recall how Royal Airlines went nuts selling passes just before they went out of business. Sad fact is, over the years many carriers in trouble have offered deep discounts to buyers who were willing to pay-now / fly-later, in order to add much-needed cash to their coffers. Sadly, in some cases, this effort amounted to little more than a short-term revenue infusion on the road to business failure.
Not to say that's what is happening here. In fact, in this case, this is a really smart move on the part of both AC and WS. Why? Well, it kills multiple birds with one stone. To wit:
1) They get the revenue now. This is good.
2) They get "breakage," or segments bought and not used. This is VERY good as it represents pure margin.
3) The passes can only be accessed and reserved-against online at the airline's own sites. While they can be *purchased* from offline agents, the traveller needs to go to the carriers' site to book them, and they are not available via online agents. This is GREAT for the carriers, who, like most travel sellers, are anxious to pull business direct and see ring-fencing inventory as key. Given that most online sites don't get access to the lowest airline fares already, this just makes that problem worse.
4) Their costs are much less. Having customers make the bookings online-direct reduces sales commissions and CRS (reservations system) fees.
5) They make it harder for travellers to compare alternatives, especially on US routes. If travellers buy passes in advance for travel to the States, they are less likely to check other carrier alternatives (which most do via online agency sites), which may be less expensive or more convenient.
6) For WestJet, offering a super discount on Eastern Triangle flights (Toronto/Ottawa/Montreal) enables them to pre-buy market share, without putting a low-ball price out in the open market.
Another interesting thing about WS' move is that they raised the bar by making their passes transferable. So, it seems that a company could buy a bunch and use them for multiple travellers. Or, a family could buy them and dole them out to kids attending university in another city or to Grandparents to come in for a visit. This has definite appeal. It will be interesting to see if AC follows.
All in, this pass war raises the bar in the battle not just between the carriers themselves, but between the carriers and their online distributors.
Game on.
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