The end of the free upgrade: the great airline business upgrade auction is ready for take-off
Online upgrade auctions that allow travellers with cheap tickets to make blind bids for unfilled business class seats are on the rise, as airlines across the world catch on to the innovative new way of making extra cash.
Last week Austrian Airlines became the latest carrier to start taking bids-for-beds, following in the footsteps of Air New Zealand, El Al of Israel, Etihad of Abu Dhabi and Virgin Atlantic.
In future, passengers buying cheap tickets for long-haul flights via Vienna are invited to bid for an upgrade to the business class cabin, which boasts 2 metre-long flat beds. If successful, they also get fast-track security, access to business lounges and improved catering.
The technology behind the bidding services has been developed by American software developer, Plusgrade, which claims it is in talks with several other carriers about offering the facility. The firm’s chief executive, Ken Harris, told The Independent: “Everybody loves an upgrade. At this very moment there are many smiling passengers in the sky, criss-crossing the world”.
The airlines that have signed up are all aiming to fill seats that would otherwise fly empty. They want to squeeze more cash out of economy passengers, while attempting to ensure they don’t “cannibalise” earnings from existing full-fare business travellers. Therefore, the system uses even more smoke and mirrors than usual in the airline industry.
When a passenger buys a ticket on a flight that is predicted to have empty business class seats, he or she will be invited to bid for an upgrade. Airlines are coy about the average level of winning bids for fear of setting a “price list” that may persuade existing business-class passengers to switch. Karsten Benz, chief commercial officer of Austrian Airlines, said: “With a bit of luck a small additional charge is enough.”
Plusgrade says its basic aim is “monetising premium inventory and services that would otherwise go unused”. It claims that airlines benefit from both increased earnings and happier passengers. But its publicity reveals that not everyone in the cheap seats is eligible to take part in the auction. The system is designed to ensure that “each passenger targeted for the opportunity and selected for an upgrade meets a host of internally prioritised goals”.
Some airlines exclude passengers who buy the most heavily discounted tickets, while Air New Zealand insists that bids are placed at least a week before departure. The Air NZ auction, called “One Up”, uses a colour-coded on-screen meter to indicate how successful a bid is likely to be: a NZ$100 (£55) offer for a Heathrow-Auckland flight from economy to premium economy shows red, while a bid for 10 times as much gets a green.
Successful bidders are contacted at least three days ahead, while those who bid too low travel as originally planned; their credit card is not charged.
Air New Zealand tells disappointed bidders: “We can’t go into specifics about why requests are not successful.”
Aircraft are flying fuller than ever before. International Air Transport Association figures for 2012 show an average “load factor” – the proportion of seats filled – above 79 per cent, meaning that on a typical flight only one in five seats is empty.
Traditionally, average load factors have varied between 70 and 75 per cent. More tightly packed economy cabins means the attraction of business class increases. Yet the premium for, say, Virgin Atlantic’s Upper Class is astronomical. The cheapest Virgin ticket from Heathrow to New York, departing tomorrow and returning a week later, is £462 in economy but £5,400 in business – more than 11 times as much.
The airline now auctions Upper Class seats on “almost all routes”. A spokeswoman for Virgin Atlantic said: “Passenger acceptance has been good – with a good take up rate.”
British Airways has no plans “at the moment” to emulate its rival by introducing upgrade auctions, according to a spokesman. At present, BA passengers can pay a specified amount to upgrade existing bookings.
BA, in common with other full-service airlines, sometimes awards free upgrades. The Gatwick-Thessaloniki flight last Saturday was a typical case. Like many weekend flights, it was “oversold” in economy class – but BA correctly judged that there would be space in business class, and that passengers could be moved to the front of the plane.
The beneficiaries were not picked randomly, but by scanning the manifest for gold card holders, signifying a high-spending traveller on BA.
Some frequent flyers regard the occasional free upgrade as a well-deserved perk, and are alarmed that it might be eroded if the empty flat beds are all auctioned off to the highest bidders.
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