If you searched business class fares between Boston and Frankfurt with mainstream carriers on 9th May, most of the fares probably seemed very expensive. If you ran the same search a week later, it was still overpriced and may have seemed like nothing had changed. Whether you used Kayak, Orbitz or airline websites to search, they all returned the same results: $5,000, $7,000 and even $10,000 or more to be modestly comfortable on an eight-hour trans-Atlantic flight in business class. If you’re clever and telepathic, you may have run your search on 12th May. If you did, you likely saw that Delta slashed business fares between Boston and Frankfurt to just $757 round trip + taxes.
Huh? What just happened? So, Delta Airlines slashed business fares between Boston and Frankfurt from $7,000 on 9th May to just $757 on 12th May only to raise them back over $10,000 by 16th May? Yep, that’s it! It may not make any sense, but airlines rarely make sense. Drastic and dramatic fare swings are how international premium cabin seats continue to be distributed in 2016.
Going back to March and even April, Delta realized that it wouldn’t find enough flyers to pay $5,000 or more for business class travel to Europe. Delta knew drastic fare cuts were needed to fill seats, as they’ve been needed every year since 2008. Though most travelers won’t pay $5,000 or more to fly comfortably to Europe, a few will. Legacy carriers artificially elevate business fares in search of a ‘sucker’ willing to overpay for business class travel. According to recent findings, approximately 15% of flyers OVERPAY for the certainty of business class travel weeks or even months ahead of their scheduled departure date. As most business class cabins are equipped with 40 seats, 15% equates to 6 seats (i.e. 6 travelers out of 40 overpay). Once the ‘sucker’ buyer commits to purchase and overpays, carriers use upgrades, award travel, and buying events to fill the remaining unsold seats. Carriers would rather slash fares than clear upgrades for their own loyalists with the hope of attracting flyers from competing carriers. When business class fares between Boston and Frankfurt fell to $757 round trip, business fares to nearby Paris (i.e. Skyteam hub) were over 400% higher starting at $3,224 round trip + taxes.
American, Delta and United are all trying to reduce premium cabin fare volatility by limiting the premium cabin seat supply. Examples of specific actions include using smaller aircraft (i.e. 757s) to destinations like Dublin and even reducing business class cabins from 50 to just 27 seats on select routes. Until carriers can find more travelers willing to overpay or carriers reduce the initial business fares from $5,000 to $2,000, premium cabin fare volatility is likely to continue for the foreseeable future.
Lars Condor is the Managing Director of Passport Premiere.
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