Subscription revenue models for airlines, what can we learn?

March 8th, 2016 | By

Subscription revenue models for airlines, what can we learn?

The latest gust of subscription revenue models can be seen in the airline industry.

Subscriptions are popping up everywhere. This month there was another example of an airline subscription model launched with OneGo’s entry into an increasingly populated space.

OneGo offers unlimited flying on 700+ commercial airline routes in the US, from 76 airports for a joining fee of $495 and $2950 per month subscription fee.

OneGo is leveraging technology to disrupt the major airlines in the corporate travel market just as Surf Air and Beacon have already done in the US and Airly is about to do in Australia.

…hang on a minute……..STOP

Lets pull that apart. That last sentence follows this formula…

[disrupter X] is leveraging technology to disrupt [incumbents Y] in [market Z] just as [example A,B &C] have already

Unfortunately its getting just a little too simplistic and frankly a little inaccurate to describe every company using technology as having a disruptive business model (an on-line platform is not exactly a breakthrough!) Its also too big a leap to lump all companies in a specific area as the same type. For example, the list of companies below share one thing in common, they all provide a member based, subscription service for airline travelers. These companies have the same business model right? Well no – they all have the same revenue model.

Call me crazy but whether the companies own, charter or just book the planes may just be a tad relevant and an indication of a difference in business model. The service type and whether the planes are staffed with company employees, or airline employees, is going to be important. As are the routes they offer and the airports they include. All of this impacts the service versus cost trade off.

Lets take a look at a few statements:

  • Surf Air is just another airline. It owns its planes just like Qantas
  • Beacon and Airly operate just like Uber, facilitating travel in someone else’s transport asset
  • OneGo is a booking service just like Webjet

And yet they are different from the comparison companies aren’t they? But its not the fact we can book on-line is it? We can do that with ALL the comparison companies. What’s mainly different is the recurring revenue model that enables the possibility of unlimited travel. Not a new idea at all…think unlimited visits to the gym for your membership, all you can eat buffets, and unlimited movie downloads.

In addition to that, its these elements that make these companies “new competition”.

  • The relationships to the planes is relevant (ownership, charters etc)
  • The revenue models have nuances to plain subscription models
  • The target market is much narrower (Top end execs)
  • The service type is differentiated (less security delay, quicker check in, greater convenience)
  • Consolidating buying power in the case of commercial airline bookings (OneGo)
  • Networking in the air with like-minded business execs

If we go deeper again, there are many more business models and revenue models in air travel. There are companies that offer you a fractional ownership of planes (eg. Netjets) and others where you own a half share or full share of a plane and get a certain number of flying hours per year (eg. XOJET) named a Fleet Exchange Program.

As we pull apart the business models and revenue models of anything shiny and new we can start to see some patterns and then we can start to see ways to take these evolutions, disruptions or leaps into other industries or indeed into our own business worlds to determine options for NEXT before others do.

  • Maybe airlines could ride share? Or conversely should Uber introduce a subscription model for unlimited rides?
  • Should gyms try not owning their premises and just “charter” space like Beacon. (Its been done already actually by EFM)
  • Can I consolidate purchasing power to get better discounts and package that up in a subscription? (Some franchises do something similar)
  • How can I use a new service to facilitate networking for business whilst we are all getting something we have to do – done?
  • How can we give people access to unlimited usage of a service in return for a monthly subscription?
  • How can I save busy people time? Because they will pay for that for sure.

The next time a company is being hailed as a disrupter, take a moment or two to pull things apart a little and see what’s in it for your business.

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