Alaska Airlines is the first major U.S.-based carrier to launch a flight
Beginning today, consumers can subscribe to Alaska Airlines’
Flight Pass, starting at $49 per month. Subscribers can fly up to 24 roundtrip
flights a year between 13 California airports and from California to Reno,
Phoenix and Las Vegas.
The system is built in partnership with Caravelo, the technology company that provides the subscription platform for Mexico-based ultra-low-cost carrier Volaris and Flysafair, a low-cost airline based in South Africa.
Pass builds on our mission to offer travelers the most West Coast destinations
at the best value,” says Alex Corey, managing director of business development
and products for Alaska Airlines.
commitment to care means offering convenient and affordable options that fit
our guests’ lifestyle and connect them to where they want to go. After two
years of staying close to home, guests are ready to travel again and with 100
daily flights from 16 airports throughout California and between California to
Reno, Phoenix and Las Vegas, Flight Pass will take them there.”
Flight Pass offers two plans
for subscribers – one requiring booking at least 14 days before travel starting
at $49 per month for six roundtrips per year, and one that allows booking up to
two hours before departure starting at $199 per month for six roundtrips per
year. Subscribers can also pay more for either 12 or 24 roundtrip flights per
year within each plan.
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Caravelo co-founder and CEO Iñaki Uriz Millan says this is
the first of what will be multiple partner announcements this year, as interest
in subscriptions accelerates.
“I think status quo is pretty risky these days. Doing what you’ve
always done and expecting that things will be different and better in the
future is wishful thinking,” he says.
“This is about improving your business model, having more predictable
and reliable revenue. So the fact that revenue managers want to do some things
differently and follow other verticals’ examples, together with the fact that we
offer the technology to do so, that is crystallizing it launching into the
market. The time is right and the tech is right.”
Millan says Volaris’ experience through the pandemic demonstrates
the value of subscriptions. The airline launched its V.Pass program in 2018 and
now has more than 30,000 subscribers. Many of those, says Millan, have been
with the airline since before the pandemic and have continued to pay every
month even when they weren’t flying.
“Volaris said those revenues that they knew they could count on
were like a lifesaver,” he says.
“Now they started to grow again. We’ve been hitting maximum
revenue levels for almost the past year. [V.Pass] is much more resilient
to crisis. It is a higher quality of revenues.”
Millan cites many additional benefits for airlines. Since a
subscription creates a commitment that lasts until the customer unsubscribes, that
customer is less likely to shop around and to be enticed by offers from other
carriers, and the airline does not have to pay to re-acquire that customer for
“More importantly we generate incremental revenue,” he says.
“The goal of a subscription program is the same goal as revenue management
– maximize revenue. [But] the approach is a bit different. Revenue management says
I will try to maximize every single transaction and if I do that I will
maximize the total. Subscriptions are not obsessed about every single
transaction, they are obsessed about the lifetime value. It’s two different approaches
to achieve the same goal; we see better results with subscriptions.”
Caravelo says its partner airlines see a revenue increase of about
1 to 2%, and subscribers travel more frequently and are more likely to
purchase ancillaries – in part because at the moment of booking a flight they
are not paying.
“But to me the most interesting [benefit] is the fact that
airlines finally get a customer base,” Millan says.
“I don’t mean loyalty programs. They get [consumers] that have
their credit card tokenized with them, that pay every single month in and out. ...
At last a customer base you can monetize.”
Caravelo provides both the technology platform – either by
managing the integration or by the airline connecting through an API – and design
assistance based on the airline’s goals.
“Do you want to penetrate a market, do you want to increase market
share, do you want to go against competition that is lower cost, what do you
want to do?” he says.
“The main thing we do is refrain airlines from using too many rules
and restrictions. You cannot approach and define a successful subscription
model with your revenue management hat on. On one you are really thinking about
the transaction and on the other you are really thinking about the
Millan says the success of subscriptions for both Volaris and
Flysafair – which he says hit its one-year subscription goal in about three
months – shows that “the market is ready.” When asked about Tripadvisor’s Plus
program – for which the company has not released any metrics but which went
through a redesign
in September just three months after launch – Millan says that is a
completely different business model.
“I wouldn’t call that a subscription. We tend to call that a club
or membership,” he says.
“What those programs try to achieve is something similar to what
loyalty programs try to achieve, which is if and when you need to travel, I’m going
to increase the likelihood of you coming to me. That’s all they do.
“[Tripadvisor] doesn’t own the inventory. You are subscribing
to an intermediary. That’s much more challenging. When you are an airline you
control the offer, the pricing, you are in command. If you are an OTA, a meta ...
you are giving discounts, special conditions on things you don’t control. So the
value proposition you can offer is much less attractive, you are not in control
and there is more risk there.”
Another company with a discount club similar to Tripadvisor is eDreams
Odigeo. In its most
recent earnings report in November 2021, the company said it had two
million members in its Prime program and 39% of its flight bookings are from
Millan says Caravelo is poised for growth as more airlines embrace
subscription programs. Last fall former British Airways CEO Alex Cruz became an
investor and board member, and Millan says the company will likely undertake a
fundraising round within the next year.
He calls subscriptions “one of the biggest topics in the travel
space,” noting there are “huge opportunities” for subscriptions for business
travel and that there is “first-mover advantage,” since customers are
unlikely to subscribe to multiple airlines that serve similar routes.
“Unlike other projects where airlines can wait and see results,
think about it and maybe in two to three years’ time say, 'Ok, I‘ll just follow' –
the cost of being a follower is going to be high here."