Tuesday, January 25, 2011

Airlines Bid To Reverse Commoditization

Holman Jenkins, Jr., wrote a very good piece this past weekend in the Wall Street Journal concerning airlines' use of the internet to try to reverse the commoditization of their service.

In particular, he points out how American, Bob Crandall's old airline, withdrew its listings from some online intermediators, including Orbitz and Expedia. Southwest and Jet Blue have blocked access by intermediaries to their ticketing, as well. Six other airlines are working with AA to establish Open Axis to wrest control of ticketing and related extras back from the brokers.

Jenkins notes,

"Too, the carriers have shrewdly held back most of their ancillary goodies, allowing them to be sold only at their own websites, ticket kiosks or on the plane itself. Because the booking networks fear they will become irrelevant if they can't display the optional services along with basic fares and schedules, airlines see a ripe moment to negotiate a new business model with the online ticket sellers.

The bottom line for travelers, though, is not nearly as profound as some make out. The shopping experience is likely to change a bit, with more targeted freebies, upgrades and "upsells" aimed at individual passengers by airlines hoping to nourish customer loyalty. But the idea (or hope) that airlines will now be able to mint anticompetitive fares is unrealistic."

Fair enough, no homonym pun intended. But Jenkins misses the larger picture, which is simply the only swing of the strategic relationship control pendulum back towards airlines in decades. Crandall said, at the end of this career with AA, that, given a choice, he'd prefer to run Sabre, the spun off ticketing business, because it was much more profitable.

With one URL pretty much as good and accessible as the next, why shouldn't airlines begin to foster customer loyalty by tying more services and benefits to patronage, albeit in legally-defensible ways? Its' the sine qua non of marketing, i.e., get away from price competition and focus the customer on the total product/service experience.

No, it doesn't mean complete price freedom for the airlines. At some point, price ranges will become too great to sustain, but some latitude will be available as flyers are drawn into loyalty webs and, with the less pleasant environment for commercial flight, the ability to enjoy better overall treatment while traveling in exchange for choosing a preferred air carrier.

Sounds like a partial return to the 1960s that my late father knew, only with immediate mobile access.

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