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    The Aviation Advocacy Blog

    A cornucopia of news, opinion, views, facts and quirky bits that need to be talked about. Join our community and join in the conversation on all matters aviation. The blog includes our weekly round-up of the bits of European aviation you may otherwise have missed – That Was The Week That Was

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Is unbundling the answer?

In this month’s Aviation Intelligence Reporter  we talked about the seemingly headlong rush by airlines to unbundle their product.  It is most unusual for normal businesses to want to go down that road, but you must remember at all times that aviation is different. What is wrong with unbundling?  It has been very successful for Jetstar in Australia, there is no question of that.  But, it reduces the ability to charge a premium.  All you are doing by going back up the ‘add extra items’ line is that you are getting back to square one.  As we said in the  Aviation Intelligence Reporter this month, that leaves you with the risk of passengers that do not get all they want, or expect and you lose the passengers that want to concentrate the pain of paying and spread the pleasure of your experience.  It also seems to challenge most of the current airline booking engines. Which is where the comparision of airline websites and Amazon comes into play.  Amazon sells the experience, not the pieces.  Airlines are like vending machines, and their websites have all the subtlety of your average vending machine.  There is little opportunity to up-sell and cross-sell. The second issue with unbundling is that there is no control group.  It is not clear that this works anyway.  Apart from Qantas/JetStar, it is very difficult to think of an airline that has tried to be both at the same time.  Little sister airlines of big legacy carriers, apart from JetStar, like Buzz, Go and Ted, have all failed.  Successful airlines are totally stand-alone. There is hope for the airlines in this model, but they have to be careful.  One case study is Dow Corning.  Dow started a low cost line – Xiameter – in 2001.  It sells 250 products, Dow sells 7.000.  There is no overlap.  Service standards are lower; delivery takes 7 days, prices in only a handful of currencies, changes to orders only at a fee; that sort of thing.  Dow’s combined sales went from 2.4B in 2001 to $3.9B in 2005.  A $28M loss in 2001 became a $500M profit by 2005. There is hope, but perhaps the moral is to always be sure to be able to charge a premium. For more information about the Aviation Intelligence Reporter please go here.

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