Qantas fare auction system raises questions about future of business class

There have been a lot of moaning and dire predictions about the deserted island the travel industry found itself on its knees on about 12 months ago.

The doomsday prophets are right: even though bookings are on the rise again, compared to 2019, ticket scanners around the world are still very high and dry.

However, thanks to the ongoing deployment of a COVID-19 vaccine, confidence is on the rise again. In Australia, that means people now go on vacation with more confidence, with the temptation to venture between states (a little) less loaded with thoughts of “What if the borders close again?” ”

A DMARGE correspondent recently booked a trip along this line, from Sydney to Noosa. While there, they received an unexpected email regarding their return trip.

Image: DMARGE.

The possibility of bidding on an upgrade to business class.

This Qantas feature, which allows you to compete for an upgrade with a mixture of points and money, has existed since 2015. What was surprising was that in our experience it is rarely offered. This is because traditional point-based upgrades take priority (and there are usually enough people on board who have enough points – and the desire to spend them – to upgrade in this way).

According to Qantas, “Bidding upgrades are available by invitation only on selected Qantas flights. ”

“If your booking is eligible to receive a Bid Now upgrade invitation, you have the option of making an upgrade offer to a more premium cabin. “

Image: DMARGE.

What is important here is not so much our correspondent’s “eBay style” dilemma (how much to bid ?!), but what that says about the Australian aviation industry at the moment.

Although this incident is anecdotal, it comes in a context where questions arise about the future of the sharp end (of all airlines). While experts don’t expect business class to go extinct, whether it makes a full recovery is still the subject of much debate – and depends on factors beyond the control of the industry (as in how far the homework revolution is becoming permanent).

As Skift editor-in-chief Tom Lowry recently said CNN Richard Quest, in a video titled “Serious Doubts That Business Travel Will Ever Come Back”, nothing is guaranteed.

“The executives we spoke to aren’t talking about a full recovery in 2022 or 2023, it’s more like 2024/2025.”

However, when it comes to the “bidding for upgrades” phenomenon specifically, calling it a “canary in the coal mine” for the end of business class travel is very obvious.

Professor Rico Merkert, professor and chair of transport and supply chain management at the University of Sydney (and editor of the Journal of Air Transport Management) told DMARGE: “As premium cabins are going through a period of time. difficile, the invitation to tender for upgrades does not signal the end of business class. Why would he do it? In fact, you could argue the other way around.

“Instead of just making people better, Qantas is now monetizing this extra value and there seem to be consumers engaging in such activity. Every little bit counts in terms of cash generation. I would call it smart revenue management during a time when demand for premium travel may be low. “

“These offers have been around for some time, most certainly on non-commercial routes such as SYD-Noosa.”

“On some routes, demand for business class is certainly low at the moment. On others, returns across the economy and businesses appear to be holding up fairly well, ”Merkert added.

Ultimately, Merkert explains the “upgrade offering” system as “modern revenue management”.

“If they only sell three seats at such an auction, it may actually make the offering of business class products attractive and something worth competing with. And if you can spend thousands of miles instead of cash, that’s even better for Qantas in terms of profitability, but again, I guess their priority at this point is cash generation and therefore supply. pure cash.

Skift Editor-in-chief Lowry showed a similar reluctance to write off the industry in the aforementioned interview with CNN Travel, saying, “Bill Gates recently said that half [of business class travellers] will not come back. I think it’s a bit austere.

While agreeing that there is a part that probably won’t come back (thanks to things like Zoom, and companies like Amazon realizing they’ve saved $ 1 billion in 2020 by banning non-essential travel), Lowry has pointed out that this break was a chance for leaders to think about how they can best come back.

What will happen in Australia? Look at this (air) space.

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