One of the things that Kirby has mentioned is how basic economy attracts the price focused consumer, but the other options keep them coming back and they frequently spend more. They see drastically improved frequency, reliability, WiFi, in seat entertainment, “free” drinks etc, and then frequently upgrade into economy plus with a “free” checked bag, more room, and a higher boarding priority. It’s the old bait and switch. It doesn’t generate the revenue of a Polaris seat to Europe, but it definitely adds to total revenue, and in this market they’re going to chase every dollar they can.

 

I really think outsourcing everything was one of the biggest mistakes NK made. Sure, it saved direct money. But the indirect cost of having a contract company that was not accountable for marshallers never having lit wands at night and absent jetway drivers was probably higher. And the way the gate agents treat the pax was atrocious. UA has closed most of the customer service desks at the airports, and directs people to chat on the app. It is not the same.... The cost of doing business should include having people on the property who are invested in the success of the company. That might be more than the bonus for the C-suite for cutting cost in the next quarter, but there should be a plan for the Qs after that.

 

So if capacity reduces and prices go up will this strategy still work? Will the basic economy seats (sold at a loss) fill up and will less buy up happen? If so, then basic economy (as they sell it today) is going away. These are fair questions.

 

The answer to your question is beyond my pay grade, and I honestly don’t know. What I suspect is that Kirby will continue his expansion and up gauging as deliveries permit. I think for the near term that he is probably comfortable with some overcapacity. It’s OK to carry some extra seats for now so that they are already in place to sell to the highest bidder when demand improves. Until then he’ll sell those extra seats cheap to claim any revenue that he can. I also suspect that he’s attempting to lure customers away from the ULCC’s and hopefully gain repeat customers due to the bigger route network, frequency, and the things like WiFi, drinks, and in seat entertainment that people view as “free” as opposed to baked into the higher price. I doubt that the basic economy model at the legacies will go away any time soon, but I do see it as a model that can be scaled up and down to meet current market forces.

 

This is exactly right. He's gone on record several times about capturing repeat customers. His theory is that things like Starlink, good IFE in every seat, and all the extra perks that come w legacy service will "convert" the LCC passenger.

 

Good IFE is simply wifi. People bring their own entertainment.

F9 will NEVER be a viable option for MOST airline traveling passengers w/o wifi.

 

Yeah, if they're forced to. Having a decent sized screen with games, current movies, TV and TV shows is very popular. You'd be surprised at how many people are watching the IFE.

That being said, I'd say Wifi is definitely more important but there's a reason seatback entertainment is making a comeback.

 

This is wild to me because I personally loved seeing the screens in the seats on Delta as it felt "premium" but at the same time, Wifi with IFE built in for free and using your own device is plenty fine if there was a holder and charging port. It is amazing how people think.

 

One of the things that Kirby has said about the IFE is that he routinely walks to the back of the plane and then back to his seat during cruise to see what people are doing. Most are busy scrolling through the IFE screens and not watching their personal devices. Those who are using personal devices are typically working on their laptops.

 

This exactly. Why watch from a crappy phone screen and have to worry about plugging it in, wifi dropping, etc. You can watch an entire movie, show, or TV on your own audio. It's a game changer for making 3+ hours go by quickly. It's especially so when you're in economy and you can't really get comfortable enough to sleep, so might as well watch stuff.