Memo to Robert Milton, CEO of Air Canada: Budgets are slashed, spending is restricted, and monopolistic fare setting on routes with little or no competition is deeply resented.
January 1, 2003
I am a business traveler who is away from home up to 20 times a year, to various locales in Canada and the U.S. I am also a sales director for a large global manufacturer. I have tried, therefore, to reconcile my experience with pricing strategies and product feature/benefit valuation against the travel industry practices.
Alas, I have reached the conclusion that trying to understand travel pricing through logic is impossible.
A recent case in point: I needed to travel to Kelowna for a Monday morning meeting and on to Vancouver for two days before returning to Toronto on a Wednesday evening. Our corporate travel agent cheerfully informed me that the fare for this excursion, if I chose to depart on Sunday afternoon (the logical choice for a father of three with a busy weekend chauffeuring schedule) would be $3,800. Yes, that is THREE THOUSAND eight hundred dollars. If I left on Saturday, the fare would drop to $800, a reduction of THREE THOUSAND dollars, or 80 per cent.
With a feeling of dread, I asked the agent to also look into a trip for the following week. I needed to leave Toronto on Monday morning for Atlanta, returning the following evening. The fare was $600 — on the same airline. I asked the agent if she had made a mistake, since I was not staying over on a Saturday. No, the fare was correct. I booked it.
An obvious conclusion is drawn. On routes where the airline faces competition (Delta and USAir both fly direct to Atlanta out of Toronto), a competitive fare is offered. On routes where competition is limited (no other airline flies more than one flight a day direct to Vancouver out of Pearson International), gross profit margins of over 80 per cent on the sale of a ticket (assuming costs below the $800 level) are attempted by the airline.
A CABLING PARALLEL
Let’s draw a parallel in the cabling business. Imagine calling your local distributor to buy patchcords, and having the following conversation:
Customer: “I am calling to place an order for a dozen seven-foot patchcords for our network cutover this weekend”
Distributor: “OK. Let me inform you of our 10-foot length-over policy on patchcords. If you buy a 10-foot patchcord, it will cost you $8. But a seven-footer will cost you $40.”
Customer: “Are you kidding me? A 10-foot cord is longer than I need. Why does it cost 80 per cent less than a cord that is shorter?”
Distributor: “That is our policy. But I see that you are a frequent cabler. You could use the points you have accumulated over the last year to buy the seven-foot cords.”
Customer: “OK. I resent having to do this but I need the cords. They have to be at my office by Friday afternoon for our cutover this weekend”
Distributor: “Oh, I am sorry. You can’t have them when you really want them. There is always a blackout period anytime you really want to use your frequent cabler points. That is our policy….”
I have heard the theory that the Saturday stay over fare reduction is intended to make air travel more affordable for personal travelers. Certainly, if one is traveling to visit friends or family, or for a vacation, their trip will almost certainly be over a Saturday.
But the theory that business travelers should subsidize personal travelers is flawed in this economy. Memo to Mr. Robert Milton, CEO of Air Canada — business travelers have no money any more. Budgets are slashed, spending is restricted, and monopolistic fare setting on routes with little or no competition is deeply resented by at least this one business traveler.
Should I drop an incremental $12,000 per year on my quarterly trips to Western Canada when spending that money could mean that customer events, marketing collateral and perhaps even sales staff need to be reduced? I give an awful lot of my time to my company. Do I also have to give up my weekends anytime I want the privilege of traveling on your airline?
Of course, I booked my flight to depart Saturday. And I was in a foul mood for the entire weekend as a result.
Count me as a frequent flyer looking for an alternative. I would like to believe that our national airline could resolve this issue proactively, adjusting fares to reflect more reasonable premiums (say $1,000, instead of $3,000) for business travel.
If not, then I am hopeful that a full service, national competitor in Canada’s air space will emerge to capitalize on my disgust at the current supplier’s pricing practices, and seize the opportunity to capture my business airfare dollars.CS
Aside from being a disgruntled business traveler, Bob Kostash is also the sales director of connectivity solutions at Avaya Canada Corp. He can be reached at email@example.com.