Thursday, December 11, 2003

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AIrlines Should Try Subscriptions! We now live in an airline hub city for the first time ever, and we don’t like it. Here we are, farther than every from family, just about completely out of driving range (1200 miles), and airline tickets are more expensive than ever. That got me thinking about airline pricing. What if airlines took a page from the cell phone providers’ playbook, and offered a subscription model? Over the past 3-4 years, with the cell phone infrastructure fairly well built-out, and more competition, the cellular carriers have been focusing on extracting more revenue from each customer. Because their product, cellular phone minutes, has minimal cost of production, they can accomplish this by offering LOTS more product for a little more price. So if you used to get 400 anytime minutes for $35/month, they will offer you 1000 anytime minutes for $50/month. You get so many minutes that you no longer have to ration them, and they get more incremental revenue. Both parties are pretty happy. Airline passenger-miles are a lot like cellular minutes. It doesn’t cost the airlines much to fill a few more seats on a plane that is already flying. So why can’t they offer some kind of plan to entice me to fly more than I would at their current prices? For instance, what if I buy $4000 worth of flight credits, good for the next 30 months, from NorthWest, in advance? (Given the parlous state of the airline industry, I would want my advance purchase to be insured.) What could they offer me? How about $150/ticket, instead of the $225 that is the best I can do now? Of course, this is the airline industry, so it would have to be complicated. Maybe its $150 for the less busy flights, and $175 for the more busy ones. Seems like it would be worth a try to some desperate airline. 6:50:20 PM    comment []