Is Delta Airlines On The Way Of Becoming A Low Cost Carrier On International Routes?

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Delta Airlines is reportedly entertaining the thought of offering ‘no frills’ seating even on their international flights to challenge competition from European Low Cost Carriers such as Norwegian.

delta-757-copyIf true, Delta would be the first major carrier who will stoop down to the level of no frills service on international routes, a concept that U.S. airlines have practiced domestically for a long time already.

The aggressive entrance into the market by carriers such as Norwegian and WOW Air must occupy the minds of aviation managers in North America in terms of how to challenge this expansion that (if not now then maybe later) might be threatening their revenue stream on overseas flights.

There was an article about this in the LA Times (access here) yesterday.

Several major U.S. carriers offer no-frills airfares on domestic flights, but some airlines may be considering bare-bones fares for international routes to respond to stiff competition from foreign rivals.

Delta Air Lines, the nation’s second-largest carrier, is considering ultra-cheap fares on transatlantic routes to compete with rivals such as low-cost Norwegian Air International, a subsidiary of Norway-based Norwegian Air Shuttle, one of Europe’s biggest low-cost carriers.

In an earnings conference call this week, Delta executives said revenue from transatlantic flights was down, partly because of competition from foreign low-cost carriers. …

Asked during the earnings call Thursday how Delta would compete with low-cost carriers from Europe, Delta Chief Executive Edward Bastian said the airline will consider offering ultra-cheap fares for international flights.

“I think we have to look at our entire service offering and ensure that we are supplying what the market wants to buy,” he said. “I think what we know is that Delta has a very, very strong brand, and much stronger than some of the [ultra low-cost carriers], and that people would prefer to fly with us than they would on some of the unknown, non-brand names.”

I applaud Delta for being progressive and thinking outside the box instead of running into trouble ignoring the sign of the times but I’m not sure if combining a no frills product with premium tickets on the same aircraft is the way to go.

To draw the line, an airline such as Delta would pretty much have to ‘zone off’ parts of the flight to have somewhere to put these no frills customers. Sure zoning isn’t that difficult on the plane and we do it already with different cabin classes but it’s more complex than this. The more zones you add, the more revenue management has to rotate their yield management and find a way to overbook flights by the right amount to not run into oversell situations.

Then there is the issue of frequent flyer benefits. No frills would mean that even if, for example, a Delta Diamond books such a budget seat he would receive zero benefits. Not even any priority benefits such as priority check-in or boarding. This will frustrate people and somewhat take the shine off the brand image, even though these customers selected their fate by themselves.

I have the same issue when I look at Lufthansa or British Airways when they sell tickets in a ‘Light’ fare class where you’re not allowed any baggage regardless of your status with the airline. All Star Alliance Gold customers should have at least one bag of 20 KG above the limitation but these ‘Light’ fares are excluded and you can’t check in anything for free. That is annoying because flights didn’t really get cheaper because of this, it’s just that Lufthansa made the fares including the bags slightly more expensive.

Conclusion

It’s a fine line for a premium airline to step into the ugly world of low cost carriers and very hard to predict the fallout of that decision. Sure, customers aren’t forced to book it but I can just imagine how it will go. During the booking process, the stinginess of people will prevail and then at the airport it would be a huge disarray with some demanding their Elite benefits. Let’s wait and see where this leads us!

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