roguetrader
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Joined: Tue Aug 03, 2004 5:14 am

High Yield Business Passenger

Thu Apr 18, 2002 11:25 pm

We hear a lot of talk about the coveted "high yield business passenger." Supposedly this person is the sole provider of airline profitability - when that occurs - and everyone seems to spend a lot of time arguing over what this person wants in air travel.

I think the late nineties may have seen the last of this creature. Times were exceptionally good, and corporations just paid whatever their travel departments, travel agents or sole airline provider told them to pay, almost without question.

I think they - the business flyer - are now wise to the fact that they've been subsidizing the coach pax , and the airlines, for years.

What do you think: will the 'high yield business passenger' maintain their full dominance in airline thinking?

kind regards,

RogueTrader
 
Stretch 8
Posts: 2468
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RE: High Yield Business Passenger

Thu Apr 18, 2002 11:44 pm

I think it may depend on the market. Within the U.S. domestic environment, ceratinly corporate travel has been and will continue to be held back. Upgrades to F class and shorter security lines are not the answers; business people just don't want or need to travel as much by air (given video conferencing, etc).
The true "high yield" may opt for corporate a/c (if available), or fractional ownership.

Across the Atlantic or Pacific, on the other hand, F and J fares are still too high; but Y class is just too awful, especially on an overnight flight, for a business person. One solution may be one of these new BA or UA daytime flights. From what I have heard, thay are only half full, and get you to LHR in time for a late dinner and full night's sleep in a proper bed. Go to work the next day in good shape (and fly Y to save the company $$).
Maggs swings, it's a drive deep to left! The Tigers are going to the World Series!!!
 
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yyz717
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RE: High Yield Business Passenger

Fri Apr 19, 2002 2:04 am

Having led corporate business plans through several economic cycles, I can tell you that mgmt has a short memory. A recession with a focus on cust cutting will quickly be forgotten once the economy starts rolling. Figure in turnover/retirement/promotions etc....and the newer mgmt have no memory of the last recession.

The business traveller may be cost-cutting now...but could be back to f-classing it en masse in 12-24 months!

IMHO

Neil
I dumped at the gybe mark in strong winds when I looked up at a Porter Q400 on finals. Can't stop spotting.
 
searpqx
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RE: High Yield Business Passenger

Fri Apr 19, 2002 2:19 am

Yyz717 has hit it on the head. I started my career on the opposite side of the fence from him, as a manager at nationwide travel management firm. I've implemented drastic staff reductions at one point (the Gulf war required us to drop 20% of staff and require all remaining staff to take a min. of 10days unpaid leave), only to turn around and go on emergency hiring binges because the economy exploded as quickly as it imploded. While today's (and likely tomorrow's) travel budgets are and will remain tighter than they have been historically, corp. travel managers also know that for those that need to travel (and 'face' time will always remain important), letting them complete that travel as comfortably as possible is important. Nothing tanks moral of the traveler quicker than being forced onto a no-frills carrier that doesn't meet their (the travelers) schedule.

So the demand will recover, to an extent. The key for the airlines will be maintaining the right mix and costs associated with serving that mix.
"The two most common elements in the universe are Hydrogen and stupidity"
 
DCA-ROCguy
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RE: High Yield Business Passenger

Fri Apr 19, 2002 2:22 am

I wouldn't look for business travelers to be stampeding back to first class, even after this downturn ends. Management might have a short memory, but management also has more options than it has had in any previous economic cycle.

Low-fare air service is more widespread in the US than at any point in aviation history, and it's growing. Even perpetually-gouged markets like ROC and BUF are getting low-fare air service. Kodak and Xerox helped underwrite the AirTran travel bank at Rochester. 17 of Rochester's 25 largest travel markets (with notable exceptions like Boston, Chicago, and Philadelphia) now have low-fare air service.

And these low-fare carriers are well-managed, high-quality operations which choose their markets carefully. They have FF programs (AirTran's will buy pax tickets on Cartel carriers to places FL doesn't go) and clean new aircraft.

The structure of the aviation market in the US is changing....high-quality low-fare carriers are here to stay. They bring fare relief on many markets, fare relief that corporate travel departments have plenty of motive to use.

I'd look for a moderate return of business travelers to the front cabin as the economy improves. They'll be more and more directed to low-fare carriers on routes where such carriers are available. And they will still have Cartel-carrier first and business class available on international routes where such service is economically viable. Also, Cartel-carrier regional affiliates will continue to be the only option to small cities, unless someone figures out how to apply the low-fare model to regional service.

Don Carty of AA acknowledged as much this week when he told employees that "fundamental changes" are needed at AA. He knows that corporations will be less willing to subsidize leisure travels, and the high cost structures of the Cartel carriers, in coming years--because they'll have choices.

Companies are businesses who must make money and produce value for shareholders. They are not welfare programs for the pre-deregulation cost structures of the Cartel-Six airlines.

Jim
Need a new airline paint scheme? Better call Saul! (Bass that is)
 
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yyz717
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RE: High Yield Business Passenger

Fri Apr 19, 2002 7:49 am

So there's hope yet Rogue that the highyield business travellers will return enabling you to remain in your cushy airline IT job for years to come. What a relief eh.

Neil
I dumped at the gybe mark in strong winds when I looked up at a Porter Q400 on finals. Can't stop spotting.
 
SegmentKing
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RE: High Yield Business Passenger

Fri Apr 19, 2002 7:53 am

eh, First Class upgrades and special security lines are a START due to the stupidity of the gvt w/ its security (anyone else think random selection @ the gate is dumb.. if they catch something @ the gate, then someone at the main security checkpoint isn't doing their job!)....

the high yield traveler is also being impacted by low fare carriers like Southwest, Spirit, Air Tran, and possibly Jetblue (most of the fares were already dirt cheap in most of their long haul markets anyway, with exceptions of JFK - Upstate NY).

-n
~ ~ ~ ~ pRoFeSsIoNaL hUrRiCaNe DoDgEr ~ ~ ~ ~
 
TNboy
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RE: High Yield Business Passenger

Fri Apr 19, 2002 8:58 am

The airlines seem committed to maintaining the front end, at least internationally, presumably because they know that any downturn in premium traffic is probably cyclical (although on the really long hauls, it is still very difficult to get premium seats at short notice.)
However, when there is a downturn, the carriers simply allow a few more award upgrades, rather than cut back the size of the product. I had thought that we may see a swing towards abandonment of First, in favour of an upgraded Business product internqttionally, but instead we seem to be going towards a fourth cabin. Looks like the airlines are confident of the yield, and the premium end is here to stay.
Bill
"...every aircraft is subtly different.."
 
roguetrader
Posts: 1404
Joined: Tue Aug 03, 2004 5:14 am

RE: High Yield Business Passenger

Fri Apr 19, 2002 9:42 am

TNboy,

I was really hoping you would elaborate on the history of business travel through the ages, as witnessed from your first hand perpsective. You can start with pre invention of the wheel (dragging by the hair) early efforts of service and bring us on through to the jet age.

kind regards,

RogueTrader
 
TNboy
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Joined: Mon Mar 04, 2002 8:12 pm

RE: High Yield Business Passenger

Fri Apr 19, 2002 5:43 pm

Rogue:
What an interesting concept. Sadly, my publisher wasn't quite as enthusiastic. He did, however, suggest that it might make a novel topic for some of my talks and lectures, but I don't know. I would have to illustrate the early years with lithographs and petroglyphs - not quite as arresting as the average powerpoint presentation, although it might go over at the more remote Lions or Rotary clubs.
A similar topic could be "My Rich and Full life in the olden days, before semi-retirement gave me time to discover the internet."
What did you do in those days?
Cheers
Bill
"...every aircraft is subtly different.."
 
bsergonomics
Posts: 458
Joined: Thu Jan 31, 2002 5:07 am

RE: High Yield Business Passenger

Fri Apr 19, 2002 6:43 pm

Can I do a bit of "Bean Counter-Bashing" here? I can't claim that all business travellers are right up there at the cutting edge, but there are a large number whose decisions will make/lose shed loads of money. And some of the ridiculous decisions made by the accountants, in the interests of saving a few pennies in one area, can have drastic effects on other areas.

Just as a stupid example (or is it?):

LHR-JFK Business Class (Virgin) - £408

LHR-JFK Cattle Class with Virgin - £188
Night in hotel (with meal) - £200
Wages for extra travelling time (half a day) - £180
Total = £568

That said, the changes do provide the opportunity for a little hilarity for those around the unfortunate Downgraded. Like a friend of mine whose company changed from Business Class with BA to GO (A UK low cost airline). After checking in, he asked for directions to the business lounge. The check in lady paused for a few seconds, staring quizzically at him, and then asked, "Sir, have you flown with GO before?" He got the shock of his life when he boarded...
The definition of a 'Pessimist': an Optimist with experience...
 
roguetrader
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Joined: Tue Aug 03, 2004 5:14 am

RE: High Yield Business Passenger

Fri Apr 19, 2002 8:37 pm

Bsergonomics,

I'm not really sure I'm following your example with Virgin there. Are you saying that flying economy is actually more expensive than flying business?

kind regards,

RogueTrader
 
eal401
Posts: 451
Joined: Wed Jul 04, 2001 9:06 pm

RE: High Yield Business Passenger

Fri Apr 19, 2002 9:15 pm

It can be depending on the route;

E.g. Manchester, UK to Almaty, Kazakhstan:

Y class return ticket = £2000 or thereabouts.

We can get C class for £1300. However, this is a restricted ticket & there are only a few availible per flight.
 
bsergonomics
Posts: 458
Joined: Thu Jan 31, 2002 5:07 am

RE: High Yield Business Passenger

Fri Apr 19, 2002 9:48 pm

RogueTrader,

What I was explaining was that, after a long haul flight in Cattle Class, there's NO WAY I'd want to go into a meeting without a night's rest. I can't work, I can't sleep, so I'd have to stay in a hotel for a night after the flight.

Mainly because of the increased seat recline and width in Business Class, I find that I have enough room to work and can actually get some sleep (albeit not great). Therefore, although not ideal, I can go straight from the airport to the meeting.

Anecdote: I once did four days either in meetings, taxis or aeroplanes. No bed. Felt like Death afterwards, but got all the work done!

On short haul flights, we tend to use business class for the flexibility as much as the service. Also, to keep us in the manner to which we have become accustomed (and not run off to a competitor).
The definition of a 'Pessimist': an Optimist with experience...
 
searpqx
Posts: 4173
Joined: Thu Jun 29, 2000 10:36 am

RE: High Yield Business Passenger

Sat Apr 20, 2002 1:33 am

Bsergonomics just did a much better job of saying what I was trying to say earlier. Premium service/carriers really do fill a role in the business travel market, so the fares (high yield) associated with will always be in existance.

The new twist though, is with the availability, especially in the US, of high quality, high frequence 'discount' carriers, such as WN and B6, the ability of the majors to command the high yield fares on all or even as many routes routes as they used to, is no longer there, nor will it likely ever be.
"The two most common elements in the universe are Hydrogen and stupidity"

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