Alaska Airlines launches flight subscription program

Alaska Airlines is the first major U.S.-based carrier to launch a flight subscription program.

Beginning today, consumers can subscribe to Alaska Airlines’ Flight Pass, starting at $49 per month. Subscribers can fly up to 24 roundtrip flights a year between 13 California airports and from California to Reno, Phoenix and Las Vegas.

The system is built in partnership with Caravelo, the technology company that provides the subscription platform for Mexico-based ultra-low-cost carrier Volaris and Flysafair, a low-cost airline based in South Africa.

“Flight Pass builds on our mission to offer travelers the most West Coast destinations at the best value,” says Alex Corey, managing director of business development and products for Alaska Airlines.

“Our commitment to care means offering convenient and affordable options that fit our guests’ lifestyle and connect them to where they want to go. After two years of staying close to home, guests are ready to travel again and with 100 daily flights from 16 airports throughout California and between California to Reno, Phoenix and Las Vegas, Flight Pass will take them there.” 

Flight Pass offers two plans for subscribers — one requiring booking at least 14 days before travel starting at $49 per month for six roundtrips per year, and one that allows booking up to two hours before departure starting at $199 per month for six roundtrips per year. Subscribers can also pay more for either 12 or 24 roundtrip flights per year within each plan.

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Caravelo co-founder and CEO Inaki Uriz Millan says this is the first of what will be multiple partner announcements this year, as interest in subscriptions accelerates.

“I think status quo is pretty risky these days. Doing what you’ve always done and expecting that things will be different and better in the future is wishful thinking,” he says.

“This is about improving your business model, having more predictable and reliable revenue. So the fact that revenue managers want to do some things differently and follow other verticals’ examples, together with the fact that we offer the technology to do so, that is crystallizing it launching into the market. The time is right and the tech is right.”

Proven benefits in subscriptions

Millan says Volaris’ experience through the pandemic demonstrates the value of subscriptions. The airline launched its V.Pass program in 2018 and now has more than 30,000 subscribers. Many of those, says Millan, have been with the airline since before the pandemic and have continued to pay every month even when they weren’t flying.

“Volaris said those revenues that they knew they could count on were like a lifesaver,” he says.

“Now they started to grow again. We’ve been hitting maximum revenue levels for almost the past year. [V.Pass] is much more resilient to crisis. It is a higher quality of revenues.”

Millan cites many additional benefits for airlines. Since a subscription creates a commitment that lasts until the customer unsubscribes, that customer is less likely to shop around and to be enticed by offers from other carriers, and the airline does not have to pay to re-acquire that customer for each transaction. 

“More importantly we generate incremental revenue,” he says.

“The goal of a subscription program is the same goal as revenue management — maximize revenue. [But] the approach is a bit different. Revenue management says I will try to maximize every single transaction and if I do that I will maximize the total. Subscriptions are not obsessed about every single transaction, they are obsessed about the lifetime value. It’s two different approaches to achieve the same goal; we see better results with subscriptions.”

Caravelo says its partner airlines see a revenue increase of about 1 to 2%, and subscribers travel more frequently and are more likely to purchase ancillaries — in part because at the moment of booking a flight they are not paying. 

“But to me the most interesting [benefit] is the fact that airlines finally get a customer base,” Millan says. 

“I don’t mean loyalty programs. They get [consumers] that have their credit card tokenized with them, that pay every single month in and out. … At last a customer base you can monetize.”

  • Related: Etihad to introduce subscription service

Design details

Caravelo provides both the technology platform — either by managing the integration or by the airline connecting through an API — and design assistance based on the airline’s goals.

“Do you want to penetrate a market, do you want to increase market share, do you want to go against competition that is lower cost, what do you want to do?” he says.

“The main thing we do is refrain airlines from using too many rules and restrictions. You cannot approach and define a successful subscription model with your revenue management hat on. On one you are really thinking about the transaction and on the other you are really thinking about the relationship.”

Millan says the success of subscriptions for both Volaris and Flysafair — which he says hit its one-year subscription goal in about three months — shows that “the market is ready.” When asked about Tripadvisor’s Plus program — for which the company has not released any metrics but which went through a redesign in September just three months after launch — Millan says that is a completely different business model.

“I wouldn’t call that a subscription. We tend to call that a club or membership,” he says.

“What those programs try to achieve is something similar to what loyalty programs try to achieve, which is if and when you need to travel, I’m going to increase the likelihood of you coming to me. That’s all they do.

“[Tripadvisor] doesn’t own the inventory. You are subscribing to an intermediary. That’s much more challenging. When you are an airline you control the offer, the pricing, you are in command. If you are an OTA, a meta … you are giving discounts, special conditions on things you don’t control. So the value proposition you can offer is much less attractive, you are not in control and there is more risk there.” 

Another company with a discount club similar to Tripadvisor is eDreams Odigeo. In its most recent earnings report in November 2021, the company said it had two million members in its Prime program and 39% of its flight bookings are from Prime members. 

Future growth of air subscriptions

Millan says Caravelo is poised for growth as more airlines embrace subscription programs. Last fall former British Airways CEO Alex Cruz became an investor and board member, and Millan says the company will likely undertake a fundraising round within the next year.

He calls subscriptions “one of the biggest topics in the travel space,” noting there are “huge opportunities” for subscriptions for business travel and that there is “first-mover advantage,” since customers are unlikely to subscribe to multiple airlines that serve similar routes.

“Unlike other projects where airlines can wait and see results, think about it and maybe in two to three years’ time say, ‘Ok, I’ll just follow’ — the cost of being a follower is going to be high here.”

Source: PhocusWire

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