American Airlines President Scott Kirby told an investor conference yesterday that airlines must do as well as hotels in differentiating – and pricing – their products.
“Hotels have done a better job (than airlines) of creating brand where they can run a 50% occupancy and that’s OK,” Kirby told a Wolfe Research conference, according to website The Street. “They don’t feel like they have to match a hotel somewhere down the road (because) people who want to stay at a Marriott property won’t stay at Hilton.”
When Starwood Hotels & Resorts or Marriott International compete for customers, he said, “they don’t compete at a single property, they do it at multiple properties.”
The Dallas-based airline is experimenting with a basic economy class – that’s cheaper seats with fewer amenities – later this year, in an attempt to segregate passengers willing to pay more for a coach seat from passengers who want to pay the absolute lowest fare. Kirby says the economic impact could potentially be in the hundreds of millions. “I personally will be disappointed if it’s not in the billions for an airline of American’s size,” he said.
United Airlines plans to follow suit this year as well; Delta Air Lines is expanding its basic economy product.
“In coach, we treat every customer exactly the same,” Kirby said. “We’re going to move to a world we have more products on the shelf to sell. It’s a much better place to be, but it’s going to take some time to get there.”