The great unbundling comes to premium travel

B USINESS class has traditionally come with a relatively clear proposition: pay a premium fare and receive a premium level of service, flexibility and inclusions. But that proposition is breaking down as airlines increasingly unbundle elements of the business-class product. Flexibility, refundability, seat selection, generous baggage allowances and lounge access were previously standard fare with a business-class ticket. No longer – now TMCs and corporate travel buyers need a clear understanding of exactly what sits behind the headline fare. Sharon Leong, CEO of Thompsons Travel, says airlines are responding to different customer segments and looking for opportunities to provide more choice and generate additional revenue. All the more reason to be vigilant to just what is now included in a fare that a month ago was fully inclusive. “Business travellers and travel managers have historically understood that paying a premium fare provided a certain level of flexibility and service,” she says. As this becomes less consistent, she says greater attention needs to be paid to the terms and conditions attached to each fare. Expectations Flexibility is particularly important in corporate travel, where schedules frequently change. Leong points out that a fare that initially appears attractive can become significantly more expensive if the traveller later needs to add services. Kriloshni Gounden, Operations Manager for TAG Travel, says the issue has become a concern for corporate travellers because the appeal of business class extends far beyond onboard comfort. Flexibility, seat selection, lounge access and the ability to make changes are also important considerations. Gounden agrees that travellers are increasingly encountering fares where benefits they previously expected have fallen away. Gounden believes seat selection, ticket changes and refundability deserve particular attention. Some fares positioned as full business class can still be highly restrictive, with additional fees for changes, no refunds following cancellation and extra charges for seat selection. She warned that the situation is moving towards one where travellers are paying a premium simply for the seat and onboard experience, and additional amounts for the flexibility and services that have traditionally been associated with a business- class corporate fare. Jonathan Gerber, Director of TAG Travel, is equally critical of the shift. “Airline pricing is complicated enough without these new moves,” he says. “Business class is a premium product; it should be flexible, easy to understand and offer premium value all the time.” Comparing fares The result is a business- class market in which the cabin name alone does not necessarily tell the travel buyer what is included. Leong describes comparing fares as “much less of an apples-to-apples exercise”. Multiple fare families within the same cabin can differ in flexibility, changes, refunds, seat selection, baggage and lounge access. Two apparently similar business-class fares can therefore deliver very different value. “The cheapest ticket is not necessarily the cheapest or best-value travel solution,” she says. Leong believes this increases the importance to TMCs of technology and data to compare the total value of a fare and communicate the differences to travellers and procurement teams. Gounden says the unbundling does now require more careful comparison of fare conditions and inclusions. Gerber similarly says that while TMCs might understand the terms attached to fares, the situation can be more complicated for clients using online booking tools or booking directly. Lounge access Airline economist Oliver Ranson, speaking of long-haul business class, says airlines have seen unbundling working elsewhere in their businesses and assume the same approach will work for lounges. Once one or two airlines begin unbundling lounge access, he believes a ‘bandwagon effect’ is almost inevitable. While Ranson says he does not believe that charging separately for lounge access significantly weakens the fundamental value proposition of long-haul business class (which he identifies as space, privacy and comfort), removing lounge access can dilute passengers’ perception of the product’s quality. Passengers do not like having options taken away. The removal of automatic lounge access can also become an issue during flight disruptions. A passenger who would not ordinarily use the lounge may want access during a delay and become frustrated that it is no longer included. Ranson is more positive on other forms of unbundling, saying that unbundling seat selection preserves passenger choice, while unbundling flexibility benefits airlines by effectively insuring them against cancellations. Unbundling baggage can also be beneficial if it encourages passengers not to check in bags. But his assessment of the removal of automatic lounge access for long-haul business-class passengers is clear: “Unbundling lounge access is not really good for anyone.” Premium economy Despite the changing product, business-class demand among corporate travellers remains firm, particularly on long-haul and overnight journeys, says Leong. According to Gounden, business-class travel remains a major requirement, particularly for executive management, where the ability to rest or work effectively during a long-haul journey is valued. Premium economy is providing another option rather than necessarily replacing business class. Leong says companies are becoming more strategic about who travels in which cabin. She believes the wider calculation should include productivity, accommodation and the traveller’s ability to perform on arrival. As business-class fares become more complex to interpret, greater responsibility is placed on TMCs to look beyond the headline price. “I think the overarching message is that business class isn’t disappearing, the definition of value is changing,” says Leong. “Our job is not simply to find the cheapest fare; it is to help our corporate clients make the most informed decision for their business and their travellers. That, ultimately, is where we believe the real value of a TMC lies.”