Economy Class Classification Brand Freight System has recently become the direction for many airlines to test differentiated services. After China Eastern Airlines took the lead in launching the "basic economy class" in January this year, HNA, Xiamen Airlines , and Sichuan Airlines have also launched brand freight systems one after another.
At present, many low-cost airlines have increased auxiliary collection by reducing meals and lowering luggage standards, the brand freight system implemented by full-service airlines has become an important way to refine passengers and increase revenue. Civil aviation expert Lin Zhijie pointed out that the brand freight system is already very common among international airlines. On the premise that domestic civil aviation policies show signs of loosening, passengers' acceptance of differentiated services is gradually increasing. If airlines need to further segment services, they need to continue to cultivate the market and transform their own service processes.
Chuan Airlines, Xiamen Airlines and other airlines follow up on the brand freight system
At the end of November, Sichuan Airlines officially launched the economy class brand freight system. The brand freight system is different from the traditional pricing system and further classifies economy class and prices according to services. For example, the Sichuan Airlines Beijing-Chengdu route has three levels of economy class, standard economy class, smart economy class and classic economy class, with prices of 1,990 yuan, 980 yuan and 630 yuan respectively. The price difference is quite large, and the rights and interests enjoyed by passengers are also different. Among them, for standard economy class refunds, the maximum fee is 15% of the ticket price, and the change is free, and the accumulation of 2456 miles can be achieved. For classic economy class, which is 1,360 yuan different from standard economy class, the maximum fee is 90% of the ticket price, and the maximum fee is 70% of the ticket price, and the accumulation of mileage cannot be achieved.
Photo/Screenshot of Sichuan Airlines official website
In the Sichuan Airlines Chengdu-Phoeuk route, basic economy class products have appeared. In addition to the stricter policy of refund and change than other cabins - they cannot be refunded, changed and cannot be transferred, and there is no free luggage amount.
Photo/Sichuan Airlines official website screenshot
In May this year, HNA launched a new brand freight system to divide the original economy class into three categories, and the service rights such as refund and change rules, seat selection, boarding and upgrading are all different. At the end of October this year, Xiamen Airlines also launched a brand freight system, further subdividing economy class into four levels, and taking the lead in trial operation on Xiamen and Fuzhou to Singapore routes. In addition, low-cost airline Xiangpeng Airlines, Urumqi Airlines, and regional airline China Airlines have also launched brand freight systems.
Photo/Screenshot of Hainan Airlines’ official website
At present, airlines’ brand freight system is based on the different pricing rules, seat selection, upgrade, points, luggage check-in, meals, boarding and other services of economy class, providing passengers with different pricing.
increases auxiliary revenue and competes with low-cost airlines
With the follow-up of airlines such as Sichuan Airlines, the trend of "brand freight" in domestic economy class classification has further developed, but in fact, brand freight has become a relatively common practice for airlines around the world. According to data released by ATPCO, an international air freight service provider, in 2018, there were 94 airlines that implemented brand freight rates worldwide, and in 2014 this number was only 4. For example, the economy class of American Airlines is divided into basic economy class, main class (economy class), and luxury economy class; Delta Airlines economy class is divided into basic economy class, standard economy class, and preferential economy class.
picture/Screenshot of Delta Air Lines official website
The role of the brand freight system in increasing auxiliary income of airlines cannot be underestimated. According to the "Top 10 Airline Auxiliary Revenue Report" 2018 (hereinafter referred to as the "Auxiliary Revenue Report"), American Airlines and Delta ranked first and third on the list, with auxiliary revenue reaching US$7.245 billion and US$5.57 billion respectively, of which the revenue contributed by luggage, meals, Wi-Fi, upgrades and brand freight rates is very considerable.
The Auxiliary Income Report shows that the airline with the highest proportion of auxiliary income in the Americas (47.6%) is Viva Aerobus, and the revenue growth brought by brand freight rates is very significant; the airline with the highest proportion of auxiliary income in Europe and Russia (41.1%) has disclosed in the investor conference call in the third quarter of fiscal year 2019 that the revenue generated by brand freight rates exceeds 1 euro per passenger.
Hu Yafen, senior manager of the Revenue Management Department of China Eastern Airlines Commerce Commission, said at the 2019 Air Marketing and Auxiliary Receipt Trend Forum that since China Eastern Airlines launched brand freight rates on January 18, as of the end of May this year, China Eastern Airlines has achieved brand freight rates on nearly 60 routes, and the difference in upward sales of brand freight products accounts for 17.37% of the total face value; sales of Shanghai-Bangkok routes that implement brand freight rates increased by 24% year-on-year, and Shanghai-Singapore increased by 36%, and brand freight rates have achieved significant results. In terms of auxiliary business revenue, the sales of seat selection products bundled with brand freight rates increased by 51% year-on-year, and the sales of upgrade products increased by 18%.
Civil aviation expert Lin Zhijie told the Beijing News reporter that the logic behind brand freight rates is to segment passengers. For passengers who are willing to pay for services, the airline will provide more services; for passengers who are more sensitive to fares, the airline will provide basic services; other passengers can also purchase what services they need according to their own needs. Airlines can earn more money while improving passenger satisfaction and compete with low-cost airlines.
Civil aviation policy is becoming loose, and differentiated services will become a trend
The "Domestic Transport Rules for Passengers and Baggage in China" implemented in 1996 have clear provisions on ticket refund fees and free baggage amounts, and it is stipulated that "passengers should be provided with beverages or meals according to flight time." This is also an important reason why many airlines have differentiated services starting from international routes. This year, the Civil Aviation Administration revealed that it is revising the "Rules on Domestic Transport of Civil Aviation Passengers and Baggages in China" and intends to delete relevant terms such as air meals.
Lin Zhijie said that more and more airlines have launched a brand freight system in China this year, and the loosening of civil aviation policies is an important factor, especially this year, the new passenger regulations are being revised and solicited opinions, which will give airlines greater autonomy, and the loosening of passenger regulations restrictions will become the prerequisite for differentiated service trends.
At the same time, most passengers have been accustomed to the "one ticket and all-inclusive" experience for a long time, and air tickets generally include airplane meals and other services. In this regard, Lin Zhijie said that although differentiated services have not been accepted by the public in the past few years, as low-cost aviation continues to cultivate the market in the past two years, passengers are gradually accepting menu-style differentiated services.
However, judging from the current brand freight rates of domestic airlines, most of them provide differentiated services in terms of ticket refund fees, points, luggage, etc., and there are few more segmented differentiated services. For example, Delta Air Lines divides meals into snacks and meals, non-alcoholic beverages and alcoholic beverages, and further refines seat allocation, seat space, etc. Domestic airlines need to implement more segmented and innovative differentiated services. In addition to further loosening of civil aviation policies, airlines also need to upgrade and transform their own service processes.
Beijing News reporter Wang Shengnan
Editor Li Zheng Proofreading Guo Li
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