The case for unbundling business class airfares got a boost yesterday when Qatar Airways announced it was restructuring its fare types. It was a significant move by Qatar, which has a top-shelf but expensive business class product. According to Qatar’s CEO, it’s all about offering passengers choice and only paying for what they need. That sounds pretty sensible. But if it is, why aren’t other airlines jumping on the business class unbundling bandwagon? Or is it only a matter of time before they do?
On Monday, David Flynn in Executive Traveller first reported that Qatar Airways was moving to unbundle its business class fares. This follows Emirates unbundling their business class fares last year and German carrier Lufthansa making moves to do so soon.
Yesterday’s news was part of a move by Qatar Airways to offer “new, simplified fare families” in both their economy and business class cabins. The airline will now offer three fare categories in each of the two cabins. In a media statement, Qatar Airways CEO Akbar Al Baker says;
“Our new fare families are designed to offer greater simplicity, choice, and flexibility to our passengers and further our ambition to offer a best-in-class retail experience.
“With these new categorizations, it is very clear to the customer what they are buying.”
Why pay for what you don’t use?
In a nutshell, Qatar Airways flipping the business class product on its head. Previously, one of the benefits of business class travel was that it was all-inclusive, and Qatar Airways has long had an industry-leading business class product with its Q Suites.
That all-inclusive fare applied whether you used the inclusions or not. You’re paying for that French champagne in business class whether you drink it or not. Or even worse, subsidizing someone else to drink it.
Qatar Airways is now following the Emirates logic and asking passengers to pay extra for add-ons like seat selection, free cancelation, and lounge access. It is a case of applying the ancillary revenue model to business class.
It’s not a new idea. For example, British Airways has long charged business class customers extra to select a seat. But the wholesale application of the ancillary revenue model in business class hasn’t yet taken off. But is this just a question of time?
All the bells and whistles top tier airlines offer premium cabin passengers cost a lot of money. By their own admission, Qatar’s lounges rival five-star hotels and “redefine the world standard in airport lounge experiences.” At their London Heathrow lounge, the airline offers an open-style theatre kitchen and heated floors for your tootsies in the showers. All very nice, but expensive to run.
A neat way to extract more revenue
The argument is, why pay for what you don’t use or want? There’s a certain appeal to this train of thought. But there’s more to it than pleasing prospective passengers.
Reducing business class fares by cutting out some bells and whistles is designed to lure passengers up from the economy and premium economy cabins. Even if they are only paying $4000 instead of the usual $6000 business class fare, it’s still a lot more money for the airline than if they’d paid $2000 to sit in economy class.
While it might be dressed up as offering choice, the real reason behind unbundling business class fares is increasing revenue.
The downside of this move is that it reduces the airline’s prestige – if that’s important to the airline (and with Gulf carriers, it usually is). But ultimately, is revenue more important than prestige? Right now, across the airline industry, it is.
While other top tier airlines might traditionally be loathe to unbundle business class fares and dilute their business class X factor, the need for cash might prompt them along the same path as Emirates and Qatar. And in 2020, the need for cash and increased revenues across the airline industry is acute.
Besides Lufthansa, no airlines besides the two Gulf carriers has yet fully embraced the business class unbundling concept. But a tough year might force a few to do so. Who’d be up next? Post a comment and let us know which airline you think it could be?