CitizenPlane: solving the airlines dilemma
This is the third part of a 3-part story about CitizenPlane. If you missed it, we suggest you come back to parts 1 and 2:
- Because of the huge cost of distributing plane tickets and barriers to entry, many plane seats are simply not on the market.
- Airlines always have a choice to optimise either their load factor (planes’ fill rate) or revenue per seat, but they can’t do both.
- Airlines optimising for their margin have empty seats but they can’t slash prices as it would destroy too much revenue.
Having proven the model of selling distressed inventory from tour operators and charter brokers, CitizenPlane now sets off to tackle the airlines’ challenge.
Starting this summer, CitizenPlane will start acting as a marketing carrier and sell flights under its own name. This means that a customer will buy a CitizenPlane flight, operated by another airline — like in this example:
Two flights, operated by Smartwings and sold by CitizenPlane
Selling under our own name brings many benefits (it’s clearer for the customer, it avoids cannibalisation with the operator, etc.). Yet the most striking is that any airline will be able to sell the same seat simultaneously at their price, under their yield management program, and at a discounted price, under the CitizenPlane brand.
We call this the “sandwich technique”. Let’s take our Paris to New-York example again. You are an airline, your price is super optimised and your economy seat retails for €500. All is well because you get traffic from your loyal customers, at a price that maximises fill rate and revenue for your target.
Yet, right next to you, some low-cost companies are retailing at €250. You could slash your prices in half and compete, but you will destroy a lot of revenue doing so. Indeed, do you prefer to have 80% of your cabin filled at €500 per seat or would you rather do a 100% fill rate at €250 per seat? If you do the math, you will prefer the former.
And so, some airlines are flying with 20% of seats structurally empty. CitizenPlane allows airline to make use of these structural empty seats. Without touching the optimal revenue program, it is possible to load a few seats in CitizenPlane and fight with the low-cost airlines under CitizenPlane’s name. Therefore, an economy seat is sold at the same time at €500 and €250, under two different names.
While preserving brand, reputation and pricing, this opens up many possibilities:
- Make use of the unsold inventories, even if they are very last-minute. It is not uncommon that a tour-operator and/or a private charterer gives back many seats. When they do, this is often complicated to reintegrate this stock into the main inventory. CitizenPlane allows to sell these seats independently and easily.
- Compete on both a loyal customer base (sensitive to brand) and opportunistic customers (sensitive to price) by selling the same seat at two different prices simultaneously. All of this without touching the current marketing logic — CitizenPlane doesn’t touch any existing brand since seats are sold under a different name.
- Create demand on a route: it is possible to drive customer to a specific route if there is a big enough opportunity. This is what happens with Secret Flying for instance. CitizenPlane can be a great way to create an opportunity and driving traffic on an underperforming route, with very limited stock, still without touching brand considerations, etc.
In a few words, CitizenPlane not only re-sells empty seats but also re-market these, to create additional revenue opportunities. Are you interested in joining the adventure? Contact us: firstname.lastname@example.org.
Same seat (2pm), 2 prices