Unbundling business class would be a big deal in the United States, but it appears that Delta Air Lines is seriously considering it, meaning American Airlines and United Airlines will almost certainly follow. But does it make financial sense for airlines to squeeze more from their most premium customers?
Delta Air Lines Considering Unbundling Business Class…What Will That Look Like And Will United Airlines And American Airlines Quickly Follow?
Unbundling is the practice of charging separately for services that were previously included in the price of a ticket. The goal is to get folks to spend more by buying the extras needed or buying up to a fare class that is is more inclusive.
Business Class Unbundling Is Not All That Uncommon
To an extent, we’ve already seen unbundling in Europe. British Airways has charged for seat assignments in business class for years. Lufthansa is doing with its new Allegris product and SWISS has always charged extra for its throne seats in business class. Most European carriers have change fees for business class tickets as well. In the Middle East, Qatar Airways has a “light” business class fare that has high change fees, no lounge access, and seat assignment fees.
So there is precedent for this, though we have not seen it come to the United States. Until now?
Delta Preparing Us For “Basic” Business Class
Earlier this year at the 2024 Q2 Delta earnings call, JP Morgan Analyst Jamie Baker asked about unbundling the premium cabin:
“This concept of unbundling the front cabin is one that I’ve been thinking about in part because unbundling and segmenting the rear cabin has been such a success for Delta and a few others. I want to be careful about asking about future pricing and all that, but I’m curious what the pros and cons are in terms of possibly going down this path, or is one price for all how we should continue to think about the D1 cabin?”
Delta President Glen Hauenstein strongly suggested that Delta was considering exactly that:
“We’ve talked conceptually about that. I think we’ll be giving you more details as we go, but we’re not ready to talk about the details of those plans moving forward. I think the investor day this year should be very exciting.”
Then in the 2024 Q3 conference call, Hauenstein went even further in suggesting an announcement is imminent:
“But we also think there’s more to go on the premium products. And I think not to keep harping in on saying, come next month and join us for our Investor Day. But I think we’ll be able to unveil why and how we think those can continue to improve over the medium and long term.”
Investor Day will take place on an unspecified date in November 2024.
My Thoughts On What May Come Next For Delta…And Others
I detest change fees and I am so thankful that one small speck of progress during the pandemic was the elimination of change fees on tickets originating in the United States.
One Mile At A Time figures beyond charging for seat assignments, the lowest hanging fruit, one immediate effect could be the return of change fees for folks who buy “basic” business class fares. I think he’s right..and I find that deeply dismaying (though hardly surprising) even though airlines promised that change fees would be gone “forever.”
Other “unbundling” we could see from Delta includes:
- Checked baggage no longer included
- Lounge access not included
- Priority check-in / security / boarding not included
- No changes or cancellations (versus simply a return of a change fee)
Meanwhile, View From The Wing notes that the marginal costs of offering things like lounge access and priority security are low and charging customers extra for them may strongly alienate customers, using the analogy of cable TV packages (charging slightly more for the full bundle earns a cable provider more money than charging separately for each channel). I do think there’s some truth to that, though I think Delta is bold enough to try and “have its cake and eat it too.”
Delta is the profit leader of the US airline industry and a trendsetter in many ways. If Delta adopted such changes, I would absolutely expect United and America to follow (not Alaska, which takes a more conservative approach). And I do think we could see a domestic first class product that does not include seat assignments and changes and a longhaul product that does not include Delta One lounge access. That’s my guess.
While I think these changes would invite the scrutiny of United States Secretary of Transportation Pete Buttigieg and may be delayed until the Korean Air – Asiana merger is approved (the US remains the last holdout in approving this merger), if Trump wins next month I think Delta would feel quite emboldened to do this. Even if Harris wins, I would think protections for the “rich” premium cabin travelers would be less of a priority.
CONCLUSION
We should see next month the extent to which Delta is willing to unbundle is premium product. I’m expecting this evolution to be incremental and at first we will see charges for seat assignments–like its joint venture partner Air France–but eventually, we will see things like no lounge access and high change fees on the cheapest business class tickets.
How would you react to the US carriers unbundling business class?
image: Delta
Shocker to see the most customer-hostile airline in the US pushing this nickel and diming.
Voted #1 for customer service year after year. Get out much?
Thee on-board customer service at Delta is pretty decent, but their policies are consistently the most customer-unfriendly of any US airline. They have been behind every negative trend in the loyalty world over the past decade, and their management has consistently expressed disdain for the frequent fliers. Delta is the Darth Vader of the industry, and anyone who values points/miles/status should loathe them.
Voted by who? They were the first to introduce dynamic pricing. Their Skypesos are worth nothing. Their loyalty program is the most expensive, forcing people to spend tens of thousands for little value. They’re more of a credit card company than an airline. Their onboard experience is average at best.
My experience with DL-operated flights’ customer service on the ground is that Delta is worse for me than what I get from AA and UA. And that is based on customer service for flights from DL hubs. While DL flight attendants tend to be better than AA and UA ones on wide-body flights, there are other parts of the customer service picture where Delta is no great thing and is actually worse for me than the AA and UA.
Terrible decision; always cutting benefits, never adding; decisions have consequences; their
most loyal fliers won’t tolerate this crap.
The most Premium US Airline, doing Premium things
It’s a race to the bottom, so of course they will follow eventually.
STFU Aaron
Oh look, the useless hate troll is back.
Nah. Chi Hsuan is at least honest. And it may be flirting? I have recommended a spanking, but no one has yet come forward.
In that case, he is all yours.
STFU Aaron
Make me. And since you can’t, you look even more impotent every time you say it.
A terrible idea. Delta is already reaching big time on even pretending that they’re a “premium airline”. Doing this would remove any plausible possibility that they could maintain their illusion.
The sad thing is, as Matthew pointed out, some actual premium airlines, like Qatar, have already unbundled certain business class amenities, like lounge access.
Which doesn’t bode well for the airline industry as a whole, from the consumer’s POV.
I see Premium Toilet fees in the future.
Charging for each flush, or each square of TP…
Agree that changes and seat assignments are the most likely to happen as we’ve seen elsewhere (I really hope that they don’t try to hate-sell it on domestic F as the bulkhead seats on domestic aircraft are inferior to the rest of the cabin).
Priority security – does this actually cost the airline anything?
Priority check-in / boarding – somewhat makes sense, but this will also be a headache to explain to people, change signs, etc
Lounge access – I can definitely see this getting pulled, especially in the current situation of crowded lounges, and that might not be a bad thing. I also wonder how many people in J also have status or a credit card that otherwise grants them lounge access vs those that don’t.
Checked baggage allowance – I suspect a similar situation to lounges re status holders. Most of those traveling in J on business won’t care since it’s not their own dime. For others, $50-100 (or so) when one is spending a few thousand will be annoying mainly out of principle but not to their bottom line.
It all seems like generally skimming the edges at this point. There’s ‘optimization’ and then there’s this kind of ‘optimization’ (i.e. squeezing). Let’s also hope (probably foolishly due to how Basic Economy was rolled-out across the industry) that the current ‘base’ fares don’t become the basic fares and then the ‘full’ fares are jacked up significantly.
With more and more people buying premium cabin fares there’s no surprise airlines are looking at ways to better monetize that. I could see the goal here to be something similar to Basic Economy where the basic bundle combined with a credit card gets you most of the benefits back. These credit card agreements are so lucrative to airlines that every move they make seems to drive people toward signing up.
This should actually provide some relief for elites as it’ll undoubtedly reduce premium cabin demand by raising the price, leaving more opportunity for upgrades. Essentially I view it as Delta could sell 10-20% fewer premium seats domestically while collecting 100% of existing revenue, then allowing more upgrades for free more or less.
It’s a monkey see-monkey do business. So I expect that the US legacy major airlines will jointly do this to shake out more money out of consumers and their government-approved spoils-sharing co-conspirators/partners in Europe will do so too beyond what is already in play.
I’ve been a 1K for years, million miler, and don’t care where I sit in business class or which lounge I use. I DETEST the nickle and dime aspect of it. But if UA does this, I may actually be able to pay less for my ticket because a lot of the perks they would up-charge for I already get with my status, if I understand this right.
At the same time, if it makes business class more affordable, you can start to kiss Plus Points upgrades goodbye even more, further devaluing the “loyalty” program.
Ah, the further CableTV-ization of the airlines. Just what they and their customers need.
Consumers absolutely despise the airlines, and most people utterly loathe them. Have they not noticed? Do they care?
Virtually all consumers (aside from some of those gaming the system here) detest what the experience of flying has become. They hate HATE HATE! the airlines. Just like they hate the Cable TV companies. Things like “unbundling” are exactly why. Sure, consumers love low prices for tickets, but they still despise the airlines (yes, I understand the inherent contradiction there, it doesn’t matter).
The next time the airlines need something from the public – like bailouts – the haters are going to be rooting for them to go down in flames (figuratively, if not literally).
Make everyone hate you…nice business strategy you got there, it would be a shame if anything happened to it.
I would be all in for a no frills business class sear. All I want in a seat that fully reclines, a pillow and a blanket. Everything else is not necessary for me. I live in a Delta hub so can easily arrive at the airport and go straight to the gate. No need for a lounge. I rarely eat and drink alcohol on planes. I can eat better and healthier at home before leaving to the airport. I don’t usually check bags, I don’t care for boarding first, if I have a seat in business class I don’t really care which seat it is. On my flight back I also usually get from the hotel to the gate so lounge is not needed. All the above applies to the return flight. Thus, if Delta offered me a totally unbundled seat in business I would take it.
You say that now until they start charging you for that pillow and blanket…
I can always bring my own. Charge me for a seat that fully reclines reclines and that’s all I need.
The goal is to charge you todays rate for tomorrows stripped down product , so in the end it’s not any cheaper
Tom is absolutely correct.
Yes, but if this goes like it did with Delta going to “basic economy”/sub-economy class service, the prices of sub-economy fare travel turn out to be higher than regular economy class fare travel was on the airline as a percentage of average income of a Catholic school janitor in a small Midwestern city at the time before the swap to sub-economy service/fare travel.
Don’t argue with Santastico, he knows all, and we should all be like him in what we want from a premium product.
STFU Aaron
Make me. Or better yet, go jump off a cliff.
As a 10+ year Diamond Medallion, I gave up on Delta last year. My wife and I are planning a trip to Europe next year. I priced Delta One and Business Class on a European carrier for the same routes. Delta was $7800 for roundtrip D1, the European carrier was $3300. Hard to justify flying Delta, when I can save $10,000 for the same trip. Ed Bastian has become so arrogant, it is no longer funny.
Yes and no. I live in a Delta hub so having non stop flights for me is a huge plus and I am willing to pay more for it. I also don’t chase status with Delta anymore as my work schedule has changed a lot and I barely fly for work anymore. Now, I agree with you on the outrageous prices Delta charges for Delta One but sometimes you find great deals if you are flexible. Just this past summer I found non stop to Europe on Delta One for less than $4k so I happily booked it. Anything above $5k is not worth it in my opinion.
Just last month I was able to find one-stop Delta One fares from MSP to India and back for c $4450 for travel within 72 hours of booking. Surprised me but it worked. But of course nowadays I send these Delta business class trips for credit to AF/KL FlyingBlue accounts instead of Delta SkyMiles.
Taking away luggage and lounges does seem petty in the context of expensive long haul business class fares.
However, ‘free’ changes aren’t free, they come with a huge opportunity cost. An airline is hardly likely to find lots of takers prepared to pay serious money for a seat that’s otherwise going to be flying empty halfway across the world in six hours. Premium leisure travellers, particularly those based in markets such as the USA and Mexico where many/most salaried jobs only come with a tiny amount of annual leave, don’t need that kind of flexibility and end up subsidising those travelling for work. Of course, I suspect that Delta will make this more expensive and/or complicated than it could be, but the premise makes an awful lot of sense to me.
Excellent point to bring up spoilage costs arising from fully refundable/changeable tickets. For the airline’s risk of the opportunity cost/spoilage potential being realized on regular paid tickets that are freely/cheaply refundable/changeable, the airline jacks up the price of such tickets and overbooks cabins/flights to try to maximize revenue any way they can. In other words, the airline usually already gets its pound of financial flesh out of consumers on fully flexible/changeable regular paid tickets.
Flew Dallas to Detroit last night in first. Flight was catered in Detroit for the round-trip to and from Dallas. While they had hot meals, the choices didn’t align with what was specified for those who pre-ordered. No snacks and no wine from the bottle that is normally served in first-class. They only had canned economy wines.
Sounds like a real MESS for Delta if they do this. ALWAYS CUTTING BENEFITS NEVER ADDING..SOUNDS LIKE THE GOVERNMENT MORE TAXES FOR LESS AND LESS OR NOTHING.
At this point I avoid TATL on US airlines unless I get a really cheap direct business class flight. All the EU airlines are far superior in food and service, and with OW emerald, seat selection on BA is free.
It would be nice in theory, especially in eastbound TATL where I have skipped both meal services to maximize zzz time in a 5.5-7hr flight. But I know what they’re going to do. Right now, I looked at a random ATL-CDG itinerary:
E – $960
Y – $1200
PS – $2200
D1 – $5400
If they do basic business, it would probably start to look something like this:
E – $960
Y – $1200
PS – $2200
Basic D1 – $5300
D1 – $$$$+++
I speculate this because that’s how they treated Y and Basic Economy fares. 4-5 years ago it wasn’t impossible to find a $750 TATL in economy.
Very disappointing, but too many seats in the business cabin are given away as upgrades or fly empty. If Delta can price some seats lower, they can fill every one and make more profit.
I do not recall the last time I flew Delta One internationally and there were seats empty. Not single one in more than 15 years flying Delta. They do get “people they know” upgraded for free. I have mentioned this many times when you see the Delta One cabin has many empty seats and when the boarding door closes the cabin is full and guess what, the FAs know the people. They chat with them to the point of spending a lot of time after service just chatting. I would rathe rhave Delta offer paid upgrades at lower prices close to the flight than bumping friends and families of FAs.
This would be disappointing. After bad travel experiences on AA and UA this year, we are all in on DL and AS as the reliability has been great (avoided DL’s July meltdown). But count us out on buying first class if they start unbundling. Delta positions the F cabin as a premium experience and this would cheapen it.
DL looking enviously at the success of Ryanair who built Europe’s largest network on their income from nasty ancillary fees
I hate the airline industry.