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The Myth of Free-Ticket Promotions

If you’re worried that too many free-ticket offers will lead to too few free seats, you can blame JetBlue (which, ironically, isn’t offering a single free ticket itself).

What did JetBlue do?

Among other things, it launched Boston flights to Florida and California on January 7. A week later, the airline began selling seats between Boston or New York and three of its four California destinations (San Diego, Long Beach, and Oakland) for $79 each way. And beginning in March, JetBlue will begin flying nonstop between New York and Sacramento, the only airline to do so.

New flights, cheap fares. But so far, not a free ticket in sight.

Nevertheless, those of us with fingers on the pulse of the industry felt the corporate blood pressure rise at the Dallas headquarters of the world’s largest airline, American.

JetBlue has been a thorn in American’s side ever since the cheeky discounter established operations in 2000 at JFK airport, one of American’s key system hubs. Adding insult to injury, JetBlue trespassed on yet another American property in 2003, challenging the “More Room Throughout Coach” (MRTC) initiative.

MRTC was a major move on American’s part—a bold and expensive marketing ploy designed to give them bragging rights over other full-service carriers, and to definitively differentiate themselves from the cattle-car-like operations of the discount carriers.

Suddenly, however, American found its heady, industry-challenging move countered not by another full-service airline, as many of us expected at the time, but by an audacious low-fare upstart.

One can imagine the anguished hand wringing in American’s corporate conference rooms. If the likes of JetBlue could match or even exceed the comfort and service levels of the legacy airlines, and still profitably sell their tickets at a meaningful discount, what future could there possibly be for American (and Continental, Delta, Northwest, and their kin), with their old aircraft, highly paid unionized workers, and cumbersome hub-and-spoke networks?

So when JetBlue kept raising the stakes, encroaching onto American’s turf, it came as no great surprise that American retaliated.

(Bear in mind that there is a precedent for large airlines beating back JetBlue’s advances. Delta managed to defend its Atlanta hub from JetBlue by offering triple SkyMiles on competing routes. After just a few months, JetBlue suspended its Atlanta to Long Beach and Atlanta to Oakland flights.)

Goliath strikes back

American’s version of throwing down the gauntlet was to offer AAdvantage members a free ticket after two round-trips between New York or Boston and select cities in Florida or California between January 7 and April 15. The free ticket may be used for travel anywhere in American’s network. As the ads pointedly proclaim, “That’s 250 cities. In 40 countries.” And that’s an offer that domestic-only JetBlue can’t match.

In short order, Delta matched American’s offer, and United responded with a similar but more restrictive version. But that wasn’t the end of it.

United liked the free-ticket approach so much that it launched a new promotion offering free tickets for business- and first-class transatlantic round-trips. Northwest and Delta quickly matched.

And that offer was followed by yet another slew of giveaway promotions from Continental, Northwest, United, and US Airways, offering a free ticket after three systemwide round-trips.

To this point, the story line is that of the little airline that overreaches, drawing fire from the industry Goliaths, which ultimately begin fighting among themselves. The small carrier, unable to respond in kind, loses business. And travelers, fairly showered with free-ticket come-ons, make out like bandits.

But there’s an alternative ending to the story as well. While JetBlue will surely lose the battle, it may still win the war. And travelers could find themselves wishing they’d turned a deaf ear to the aggressive promotions.

The myth of the free ticket

Remember those free tickets? As frequent flyer program members know all too well, the promise of a free seat often turns out to be an empty one.

The seats on offer are, of course, capacity controlled. In other words, there are a limited number of them. A very limited number. In most cases, they are the same seats that are available to frequent flyer program members as mileage awards. And between September 1, 2004, and April 1, 2005—the period during which award travel from all three free-ticket offers overlaps—there will indeed be a furious free-for-all as free-ticket holders compete with mileage redeemers for the few available seats reserved for non-revenue passengers.

This situation can only lead to frustration and disappointment.

Such hollow marketing brings to mind the recent spate of policy modifications that allow elite-level program members unlimited complimentary upgrades. Like the original free-ticket offer, the move at least partially targeted discount carriers, which generally cannot reward their best customers with upgrades and related perks since they have no first-class cabins or airport lounges.

And also like the free tickets, the upgrades are space available. So in both cases there’s bound to be a disconnect between demand (robust) and supply (meager).

He who laughs last, laughs best

This is a story with several interlocking themes. David versus Goliath. Titan versus titan. Fear versus greed.

What most concerns me is the deceitful-company-versus-the-hapless-consumer angle. In their growing desperation to gain traction against the low-cost operators, the majors seem increasingly inclined to launch campaigns that are structurally unsound if not altogether implicitly deceptive.

I’m guessing that in the coming months, when the difficulty of redeeming a free-ticket voucher for a free seat becomes painfully apparent, the offers will ultimately alienate large numbers of consumers, resulting in a net negative effect on the loyalty of the majors’ customers, as well as their revenues. The new unlimited upgrade policies for elites may similarly backfire.

In which case, JetBlue will have the last laugh.

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