Branded fares aren’t new to the airline travel industry but they are most often discussed in a manner of how they benefit carriers and how they benefit individual travelers. But what are branded fares really and how can we understand them in the context of managed travel?
Branded fares are the bundling of optional services that airlines historically charged for a la carte – in addition to the base fare – or provided on a complimentary basis. We refer to these in industry terms as ancillary services and ancillary fees. These service offerings fall into the following categories:
The benefit of bundling services for airlines is the potential to up-sell or ability to drive more ancillary purchases from targeted customer segments. The benefit for the customer is that they receive, on average, a 10 to 12% discount on ancillary services. This cost savings can sometimes amount to no more than five dollars, but it’s a savings nonetheless. Depending on travel volume, cost savings can add up over time.
Branded fares also allow airlines to build both brand recognition and loyalty. For example, you might think of “Choice, Choice Essential and Choice Plus” for American Airlines, “Blue, Blue Plus, Blue Flex and Mint” for JetBlue or United’s “Premium Economy” when it comes to your preferred airline.
From priority boarding, to lounge access or extra rewards points to additional leg room, individual travelers get a sense that they know what to expect from their entire airline travel experience when booking with a branded fare.
In practice, branded fares enable airlines to provide customers with a different type of transparency when it comes to the complexities of pricing. In recent years, you’ll have noticed a shift in how airlines with branded fares display their search results.
It’s now more common to see a matrix of fare comparisons between the different branded fare options and your requested itinerary. These airlines also provide a separate comparison chart displaying each of the ancillary services and showing which of those services are offered or bundled into the branded fare.
Displaying fare options in this manner allows passengers to make a value call based on the total price of the package versus deciding on each additional cost/service individually. While this makes the decision-making process easier for passengers, it adds another layer of complexity for companies that need to capture expense data on their travel programs.
Meaning that, when a company wants to look up the statistics on how much was spent annually on baggage fees or onboard Internet, it becomes difficult to extrapolate that data from bundled fares. While branded fares might seem more transparent to passengers who want to know the price they are paying for a ticket, it’s not quite so transparent for travel managers and finance teams.
When travelers use their company’s TMC and designated online booking tool to book their airline tickets, those pieces of critical data are automatically captured and recorded for reporting purposes. When travelers book out of policy and use a separate public booking site or go directly through the airline, that data is never recorded.
Companies that are able to accurately report and measure their annual spend on ancillary services are better able to negotiate discounts and pricing with their preferred suppliers. It’s important to understand this expense reporting challenge from the outset when addressing branded fares in your travel policy.
Given the complexities of un-bundled fares and branded fares, it is necessary to re-address your policy thresholds. Most companies set and enforce a price threshold on airfare that is either fixed (e.g., no more then $500 on domestic fares) or flexible (e.g., no more than $50 or X% over the lowest available fare).
Measuring the lowest available fare is a bit confusing these days with all of the alternatives offered by each airline. Customers can have their TMC generate reports to show comparative statistics on what fares were selected and what were the lowest priced.
It should also be noted that there are new fares in the market that don’t allow for changes, seat assignments or upgrades. Some companies believe that these fares should not be considered when determining the lowest available airfare. Both fixed and flexible fare price policy practices start with a base fare that does not include bundled or ancillary services.
Clarity in this policy area is needed so that your travelers can either justify a slightly higher fare that includes services or items they need, or so you may choose to advise your travelers to avoid bundled fares – even when they are a good value. If your travel policy doesn’t address approved ancillary services in bundled fares, then your benchmarks for measuring trip value should be more clearly defined.
Another thing to consider when it comes to branded fares is that it becomes more complicated for a traveler to improve a seat selection on their personal credit card, should upgrades or preferred seating not be allowed in the company travel policy. Many of our customers like the fact that their travelers can purchase the absolute lowest un-bundled rate and any authorized add-ons can be justified and/or paid for by the individual traveler if the company doesn’t want to pay for such services.
A common example is preferred seating. Companies typically make sure their travelers have at least an aisle or window seat, but if Economy is the only approved class and the traveler wants some extra legroom up front, it’s up to them to pay for it. With branded fares, this provision is becoming more complicated.
As we said at the start, branded fares aren’t new to the airline industry and if recent trends are any indication, we’ll be seeing even more of them in the future. If you haven’t already addressed branded fares and ancillary fees in your travel policy, doing so is an important first step to providing more visibility for traveler expectations, enforcing spending limits and accurate reporting. Click here to download our free travel policy workbook and get started on updating yours!