One of the biggest recent changes in aviation has been the rise of low-cost carriers; budget carriers characterised by lower fares and fewer frills than those offered by superlative ‘legacy’ carriers. More often than not, travellers booking with low-cost carriers forfeit the quintessential luxuries they experience with full service airlines such as complimentary meals, loyalty programs and the option of tiered seating classes.
The first contact with a no-frills, low cost airline, for many Australians, was probably Virgin Blue. This would have been characterised by direct online booking, no loyalty program, no airport lounges and no free onboard service. Now, of course, Virgin Australia is as far from that model as you can get! And the Virgin Group now uses Tiger as its low cost airline offering.
The amount of business travellers opting for low-cost carriers can be attributed to the increased pressure to cut corporate travel budgets, so it comes as no surprise to see more and more suits alongside the board shorts and sarongs on flights!
In what feels like a perfectly timed response to this changing climate, Jetstar, which is a low-cost subsidiary of Qantas Airways, recently launched its first business class fare called ‘FlexiBiz. Although it is largely aimed at small to medium enterprises, it’s categorically available to all businesses. What makes this new fare so unique is not that it’s the first of its kind on the low-cost airline, it’s because it blurs the lines between two airline business models: low- cost carriers (LCCs) and full service airlines.
So what's it to be for your corporate travellers? We've compiled a list of features typical of the respective carrier types to help you identify the right option.
Characteristics of low-cost carriers
- Low fares (although smart buying and use of inflexible fares can produce similar fares from legacy carriers).
- Strict use-it-or-lose-it rules, especially with the cheapest tickets.
- Ancillary fees: Expect to pay for ‘extras’ like luggage, meals, seat selection.
- Secondary airports: Don’t be surprised if you have to use secondary airports for some of these services. For example, Scoot doesn’t fly to Brisbane, but uses the Gold Coast instead.
- No loyalty program: Your travellers generally won’t earn points for their trips.
- No airport lounges: While the airlines don’t have airport lounges, some travellers with memberships to lounges may be able to use those. For example, Qantas Club members can use that lounge if they’re on a Jetstar flight.
- Single-class cabins: While the original LCCs had only economy class seating, some airlines in this category now have a few ‘business class’ seats or charge more for rows with extra leg room, like exit rows.
- Online booking: The LCC model is based on direct bookings, but increasingly, these carriers are being forced to make their inventory available through the traditional distribution channels.
- No corporate deals: Don’t expect to be able to negotiate incentives or discounts on published fares.
- Limited interline arrangements, which make it less convenient when doing multi-stop trips on different carriers.
Characteristics of full service carriers
- Generally higher fares, although airline economics means that even legacy carriers have to offer discounts to keep their planes full.
- Special corporate deals, across the board discounts and route deals, especially if you can guarantee the airline the lion’s share of your bookings.
- More inclusions: Expect the fare to include luggage allowance and inflight meals or snacks.
- More extensive routes because they don’t have to chase the most popular leisure destinations.
- Airport lounges: Corporate programs often include lounge access which is generally offered with premium fares.
- Loyalty programs: Your travellers will earn points for each trip, which is useful to reinforce compliance, but can be a distraction if they are members of different programs.
- Alliances: Most legacy carriers belong to one of the global alliances or have codeshare arrangements with other legacy carriers, ensuring a more seamless experience when travelling internationally.
- Multi-class cabins: Travellers will have a choice between economy, premium economy and business class. Some airlines still have first class on some routes.
So low cost vs full service airline travel, which option is right for you?
Both types of product have their benefits and pitfalls, and it’s not unusual for corporates to use a mix (see our blog on Best Fare of the Day).
Your choice will depend on where your organisation sits on the cost vs traveller experience continuum. If you’re keen savers and have a tight travel budget, you’ll more than likely opt for LCCs. However, if your company ranks the comfort and contentment of staff as more important than cost, you’ll probably opt for legacy carriers.
The decision will also be affected by the routes you use most. If the bulk of your travel is between Sydney and Brisbane, you can probably save a bundle by using LCCs and not upset too many travellers. But try convincing your sales director to sit in a tiny economy seat on an eight-hour flight to Singapore with no meals, movies or bar service! If you do a lot of travel within the US or Europe, you can also benefit from some excellent LCCs.
Corporate travellers tend to favour legacy carriers which are geared towards corporate deals and three-way relationships with TMCs. In fact, if you have enough volume and good compliance, it generally makes sense to use full service airlines which offer so much more – often, for not much more money.