In the complex world of ancillary fees, branded fares can simply be an easier way for customers to understand what they are paying for and that doesn’t necessarily mean a discount, writes Tom Bacon

Branded Fares in the US are being revamped.  This year both American Airlines and Frontier Airlines, the two leaders in branded fares in the US, dramatically restructured their branded offerings.  What I’ve heard is that they were both very dissatisfied with the actual sell-up experience they had achieved.

Branded fares re-bundle select unbundled features and offer a discount versus purchasing a la carte.  The idea, obviously, is to get a passenger to buy more than he otherwise would; conceptually he will select the discounted bundle rather than stick with the low base fare.  The airline offering branded fares, however, must assess dilution (less revenue for the full bundle versus a fully a la carte offering) versus stimulation (more upsell).  In the US, both Frontier and American initially offered a very large discount (>20%) on their re-bundled services – and potentially experienced more dilution than upsell.

But, and this is a big but, branded fares need not come with a discount at all in order to have value for customers.

There is a model for travel bundles – vacation packages.  With vacation packages customers book their flight and hotel together, potentially along with events or activities.  Customers often select the packages based on convenience without studying the component parts.  They appreciate the convenience of the package – tremendously simplifying trip planning.  The vacation package, in fact, can be higher or lower priced than the component parts.

Building a better understanding

Rather than a tool for discounting, branded fares can be a way to help customers better understand the new world of often-complex, ancillary fees.  As such, the fares need not have a large discount – or any discount at all – relative to a la carte.  They may simply represent an easier way for the customer to purchase what he otherwise would have to search through multiple screens to find.

Frontier Airlines launched branded fares in the US in 2008 with ‘classic’ fares.  At the very beginning of industry unbundling, ‘classic’ was designed to convey to customers that these were the old bundled fares, including free bags, as well as all the familiar possibilities to make changes. Frontier offered a large discount – partially due to heavy competition from Southwest whose base fares did in fact resist the industry unbundling.  But, without the Southwest effect, Frontier could have provided no discount and still provided value to customers who were bewildered or angered by the industry unbundling.

Perhaps this is a better way to think about branded fares – as a way to simplify the buying decision. 

American Airlines’ (AA) revamped ‘choice essential’ fare no longer implies a discount.  For $4 more than the first bag fee, AA offers passengers the option to buy priority boarding along with a free bag.  American doesn’t offer priority boarding as an option on an a la carte basis so the $4 is purely incremental revenue – no dilution occurs.  AA is counting on passengers appreciating the simple bundling it presents via its branded fare.

In the new world of ancillary fees, any way to simplify the process is worth a lot to travellers.  Branded fares, in this context, can offer real value – without the large discounts that was associated with offerings when they were first introduced in the US.

Guest columnist Tom Bacon is 25-year airline veteran and industry consultant in revenue optimisation. 

Questions?  Contact Tom at tom.bacon@yahoo.com or visit his website http://makeairlineprofitssoar.wordpress.com/