An “all-you-can-eat” pricing model for the airlines.


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Surf Air

I missed the initial announcement two months ago, but a new startup airline—Surf Air—claims to be the first airline to exclusively adapt the all-you-can-fly pricing model. While the airline is not due to launch service until this coming summer, Surf Air claims that they will “revolutionize the way you will fly.”

More recently, the company just recently received Series A funding from multiple investors. According to the Wall Street Journal,

The company has raised $4 million dollars in a Series A investment led by Anthem Venture Partners and joined by New Enterprise Associates, Baroda Ventures, Siemer Ventures and twenty angels. One notable angel investor in Surf Air is Jared Leto, the lead singer of 30 Seconds to Mars and an actor known for his role in the 1990s TV drama “My So-Called Life.” Unlike attempts by large airlines, including American Airlines and Jet Blue Airways, to offer fly-all-you-want programs or promotions to any world destination via larger aircraft and major airports, Surf Air wants to appeal to air commuters, not world travelers.

While the airline touts its simplified flying experience (no hassle, no lines and no fees, book in under 30-seconds, convenient and accessible local airports, etc.) and enhanced experience (first-class luxury in executive aircraft, on-site, personal concierge service, exclusive community of air travelers), the real story is their unlimited flying per month pricing plan.

The pricing model is simple and straightforward (that alone will give them a huge advantage over their competition). For as low as $790 / month (and upwards of $1,400), members of the airline can fly as much as desired between (initially) four planned Sun Air California destinations (Palo Alto, Monterey, Santa Barbara and Los Angeles). Other destination cities in the works are Las Vegas, Palm Springs, San Diego, Sacramento, Lake Tahoe and Napa Valley.

According to Mark Johanson of IBTraveller, the concept isn’t exactly new. In 2010, Minnesota-based Sun Country Airlines had a 37-day “fall free for all” ticket for $499, while JetBlue had a one-month “all-you-can-jet” pass for $699. JetBlue’s pass was so popular that it sold out in two-and-a-half days. Many credited the all-you-can-jet pass for boosting JetBlue’s national exposure.

Here’s my (admit ably simple) take on the pricing plan. $790 per month is too low. I think the price / demand curve for their target customer is relatively flat in that a significant price hike (say 50%) would result in a very limited decrease in demand. If the airline is targeting a customer base that truly values the experience that they are promoting, then they should price themselves as a high-end service and not as an alternative for frequent business (or personal) travellers who are looking to save a buck versus the traditional a la carte airline pricing model. Don’t focus on price comparisons; focus on the enhanced service aspect (“first-class luxury”) – that’s what their target customer base really values.

Here’s the takeaway: Richard Branson once said “the quickest way to become a millionaire is to start off with a billion dollars and launch an airline.” How true! In an industry that has collectively lost over $33 billion since inception, profitability is challenging (to say the least).

Sun Air believes that its all-you-can-fly membership model will “fundamentally change the way people travel and revolutionize the airline industry.” That may be true, but what matters most to over the next few years is getting it right. Remember, it’s not the first mover who reaps the spoils, but rather, the first to get it right. That’s where the real money is.

Republished with author's permission from original post.

Patrick Lefler
Patrick Lefler is the founder of The Spruance Group -- a management consultancy that helps growing companies grow faster by providing unique value at the product level: specifically product marketing, pricing, and innovation. He is a former Marine Corps officer; a graduate of both Annapolis and The Wharton School, and has over twenty years of industry expertise.


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