Airfare Options

Most of the ideas for juicing non-ticket revenue at airlines that are glossed in Christina Negroni’s informative look at the aviation industry seem a bit silly. Sure, Air New Zealand might be able to make money issuing a debit card, but you could say the same for any firm. Why does an airline have a particular advantage moving into that space? An exception to the silly trend is this idea from Continental and United to create options for tickets:

Continental Airlines, which merged with United Airlines last year, is also taking business ideas from the world of finance. A year ago, it began selling options on ticket prices. The program, FareLock, lets would-be travelers freeze a ticket price for as many as seven days by paying a small fee which the airline keeps regardless of whether the customer ultimately makes the purchase. United will adopt the program next month, when its reservations system is merged with Continental’s.

“It’s a value to people like a stock option is a value,” said Jeff Smisek, the president and chief executive of United Continental Holdings. It lets you buy stock at a fixed price. Well, this is an option on a seat.”

This is hardly a killer solution to all commercial aviation’s woes, but at least it makes perfect sense. You can see why an airline would be the company that sells this product, and you can imagine situations in which customers would want to buy it. Still it does seem striking to me that the only really successful firm in American aviation is Southwest and they conduct their core business in a whole different way—different attitude toward hub-and-spoke, different approach to online booking, much friendlier relations with labor unions, etc.—rather than just tacking a few good new ideas onto the old business.