So here’s a Fortune interview with Jeff Smisek, CEO of United Continental, talking about innovation.
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So do baggage fees really count as innovation?
That’s a tough pill to swallow. And I say that not because I object to baggage fees. Rather, I don’t see how you can pitch disaggregating service as innovation when it is what every other firm in the industry is doing. United wasn’t even the first firm to unbundle baggage handling from their primary service offering (I believe that honor goes to American among the major US carriers). I don’t see how utilizing the same fare structure as every other major carrier not named Southwest moves you from providing a commodity service.
It is also not clear that they are unbundling services solely to offer customers greater flexibility and to prevent one class of customers from cross-subsidizing another. United will still bundle when it suits them. Take, for example, frequent flier miles. In United’s eyes they have value. They charge $67.25 to buy a thousand miles. However, they will not offer me a discount to forgo them. Airlines love to talk up the wonders of their frequent flier programs but I think they would profoundly embarrassed by the number of customers who would take a $50 discount over accumulating miles toward loyalty awards.
That said, Continental’s FareLock program sounds pretty cool. That certainly is an innovative solution to a consumer problem. It seems that the charge for holding a reservation varies. How to price that well would be an interesting problem — particularly as you get near the time of the flight. If a consumer wants to hold three seats four months out, there will certainly be other opportunities to sell the seats. A week out, however, it is a different story.