OK, so you’re planning that long overdue trip to Europe and want to fly comfortably. You check business class fares between L.A. and London on several mainstream sites, but they’re all asking for a whole lotta dough. Despite all the hype, they all show fares at $6,000, $7,000, $8,000 or more. No problem. You’ll just buy economy and use all those miles you’ve piled up to score an upgrade. Just when you think you’ve got it covered, think again. Despite 50+ empty seats in business class, the airline says your upgrade request is “unavailable”.
You’ve nearly lost all hope for finding a cheap business class ticket, and then BAM! It comes across your handheld and you can’t believe it. A round trip business class ticket for $362 + taxes between LAX and Heathrow. It’s not a misprint. $362 + taxes, and using real airlines you’ve actually heard of: American, British Airways, Delta Airlines, United and Virgin Atlantic.
This exact scenario actually played out on 15th October 15th 2015 when all major carriers slashed business class fares up to 95% for 48 hours. Prior to October, it happened on May 6th and September 8th. When rock bottom business class fares – also known as business class buying events — are released, react first and think later. Complete your ticket purchase before these silly carriers change their mind, and then take a moment to reflect on what just happened. In reality, carriers intentionally make it difficult to be “in the know” when business class fares crash. You’ll want to sign up for a monitoring service to be sure you don’t miss the next buying event, but more on that later.
Your initial reaction is that when a business fare plummets 95% ($7,000 + to $362) it’s obviously a “fare war”. There no other logical reason for fares to be cut so drastically other than competition, right? Then again, is there still competition amongst airlines, or were the initial business class fares just massively overpriced?
By definition, fare wars are a period of intense price competition among airlines. They’re generally predatory in nature, aimed at driving competitors out of business. With just three remaining legacy carriers remaining (American, Delta & United), and with oil at record lows, do you really think the big three carriers are trying to drive each other out of business? The great recession of 2009 was the backdrop for unprecedented approvals of airline mergers by the Department of Justice. The U.S. went into recession with six U.S. airlines and emerged with three surviving U.S. legacy carriers. The last thing the big three U.S. carriers want is a competitor going bankrupt because of a fare war, as this could jeopardize their deregulatory status.
So if business fares didn’t tank because of a “fare war”, what caused it? Those comfy flatbed seats in the front of the plane are labeled “business class” for a reason. They’re supposed to be consumed by price insensitive business travelers, not regular ol’ consumers. Individual travelers are supposed to be satisfied with economy while big business should enjoy a 180 degree flatbed seat with a $7,000 + price tag. This, of course, is the airline’s perfect world, but what happens when “big business” prioritizes value over comfort?
Ironically, falling oil prices simultaneously benefit airlines while creating headwinds for any big business with exposure to energy, metals, and manufacturing. These sectors have historically been among the biggest buyers of expensive business class tickets, but declining earnings and margin compression has forced industrial travelers to tighten their belts and try flying comfortably on a budget. If “big business” isn’t buying pricey business tickets, who is? Airlines in the U.S. are asking the same question!
Though price insensitive travelers that value comfort over price are in decline, they’re not extinct. Airlines have turned premium cabin seat distribution into a game, artificially inflating fares in search of that lucrative “sucker” flyer, only to slash fares once the “sucker” completes their purchase. Ten years ago, Los Angeles-London flights for $362 in business class was unthinkable. Today, it’s the new normal. Carriers routinely slash fares 90% for a few days or even hours to unload excess inventory. Business and industrial travelers continue to tighten their belts and change their free spending ways. Carriers are trying to find new ways to fill their premium cabin seats without losing price insensitive travelers.
The “new” name of the game is to sell as many seats (even if only a single seat) at the highest possible price, then slash fares on the remaining seats and finally clear upgrades for any seats that are leftover. The next time you see a $362 business class fare to Europe, or a $40 business class fare to China, it’s probably not the result of a “fare war.” Just like other commodities, when buyers stop overpaying, prices correct lower. If you need help being “in the know” when business class opportunities happen (i.e. a $362 ticket to Europe), consider running a search online for ‘business class historical fares’ or ‘fare monitor’ to find useful tools and resources to help you in your next business class fare steal. Good luck!
Lars Condor is the Managing Director of Passport Premiere.