Bargain Basement Buy-Up Upgrades on Continental
A friend emailed me today "Does this seem sort of silly to you?
I went online to change seats on my Continental flight EWR-SEA next week- look at the options and the prices!". To which I replied "Snag the cheap upgrade- now!".
Back on topic, it doesn't take an economics genius to realize that it doesn't make much sense to price first class lower than an exit-row coach seat. Or does it? I guess on one hand, dangling cheap first class upgrades is a surefire way to start building loyalty with non-status customers who are used to receiving no special perks. But why would an exit row be more expensive?
And also, at what cost do these cheapo upgrades come? Clearly, if my friend were to buy the $95 upgrade, it just means one less seat that an elite member will get if the seats don't sell. So is it worth it to keep your 75,000+ mile a year road warrior happy with their upgrade, or does it make more sense to get an additional $95 in revenue for the same seat? Continental obviously feels that the latter is more important and you can't argue with them trying to make more money- they are a business after all. However, the top 5% of customers make up a disproportionate amount of business for the airline, so disenfranchising them will just make them consider switching loyalty.
I think this super cheap upgrade "to anyone with tens of dollars" is a risky bet for Continental. I know that many of their elite flyers are nervous about the merger- many are my clients and I speak to them every day. By eroding the benefits they've come to enjoy and adding in the uncertainty of a merger, they stand to lose a lot of customer trust and confidence, which is always tough to earn back- just ask US Airways.
Delta also mentioned at their Investor Day presentation that they are going to increase the size of their first class cabin, but also "Increase percentage of first class up-sells". I'm not 100% sure what this means, but I hope they take a different approach than Continental and still take care of their top tier flyers. Delta's elite program is strong because of the domestic upgrades- if they take away that benefit, then I'd surely take all of my business to American, where I can at least earn extremely valuable systemwide upgrade certificates that can be used on almost any fare internationally.
In any case, I'm glad the airlines are making more money, but I hope they continue to enhance their loyalty programs, instead of watering them down. I guess time will tell, but I'm not going to lose sleep over it. As the travel industry evolves, we need to evolve with it and choose programs that meet our needs.