El Al launches low-cost style service

El Al, photo: Sivan Farag

El Al VP Marketing Miki Strassburger: Passengers won't pay for luggage or ticket flexibility if they don't need it.

While discontinuing its UP brand, El Al Israel Airlines Ltd. (TASE: ELAL) today launched a new pricing policy for its flights to Europe. This new policy, which most of the world's airlines are already applying, establishes three types of tickets according to the level of service included. A Lite ticket is a low-cost product with no luggage or choice of seat; a Classic ticket includes luggage and choice of seat, and a Flex ticket also offers the option of changing or canceling flights, as well as priority in boarding the plane.

The price differences between the levels are $80 between the Lite and Classic tickets and $100-150 between Classic and Flex tickets (for roundtrip tickets).

It is also possible to combine the levels, buying a Lite ticket for the outgoing flight and a Classic ticket for the return flight (the difference between the price of a roundtrip Classic ticket and a combined Classic and Lite ticket is $40). Another option is to buy a different ticket for each member of a family; if children do not require luggage, cheaper Lite tickets can be purchased for them. The difference between the levels is maintained for any ticket pricing. All of the prices are valid for flights issued starting on October 15.

Furthermore, there is no restriction on the number of seats that can be purchased at each level. Theoretically, there could be a flight on which all of the passengers buy Lite tickets. These three price levels reflect the service included in the ticket, but do not determine the actual ticket price, which is affected by elements such as the date on which the tickets are purchased and the allocation of seats for each flight and its date. While it is theoretically possible for all the passengers on a flight to purchase Lite tickets, it is very probable that they will not all pay the same price for them.

Ticket price prices published include $90 to Berlin and $190 for a roundtrip; $210 to Amsterdam and $290 for a roundtrip; and $270 to London Heathrow Airport and $480 for a roundtrip. An outgoing flight to Athens will cost $50 and roundtrip tickets for that destination will start at $120. All of these examples are Lite tickets, i.e. without luggage. The added cost for a Classic ticket to all of these destinations is $80 for a roundtrip ticket. El Al is planning to operate a new website soon designed to improve the online booking experience.

"There are sizeable segments of passengers who can save money by flying El Al," says El Al Marketing Vice-President Miki Strassburger. "Not all passengers have to pay for luggage, or ticket flexibility if they don't need these services." Services can be added to a low-cost (i.e., Lite) ticket: advance seating for $15 per direction and luggage for $35 per direction ($70 per direction for someone buying the service only upon arrival at the airport). In other words, it does not pay to buy a Lite ticket if you are planning to add these services, given the built-in $80 difference between the ticket levels.

Strassburger rejects assertions that El Al's plan to use the UP brand to compete with low-cost airlines failed. "We're marking the fourth anniversary of this brand, and it was a successful event for us. Over the past three years, we have been dealing with the dilemma that tourist class on UP suits the Israeli consumer, who has experienced the pricing revolution in the sector, making the public seek to pay for what it uses, but on the other hand, we eliminated business class on these routes, and it is important for us to restore it," he explained.

The routes operated under the UP brand included Kiev, Prague, and Berlin. "A few months ago, we decided to introduce a model combining the best of both worlds, including the business class cabin. The discussion was whether to keep the UP brand or bring it back to El Al. We decided to continue with our superior brand as something that seems very natural to us."

The fee for canceling or changing a ticket in the new format is a function of the ticket level. Even with a Flex ticket it costs $50 to cancel or change a ticket, while the cost is much greater for a Lite or Classic ticket, ranging up to the full price of the ticket. Under the Consumer Protection Law, however, a transaction can be canceled within 14 days of the purchase, subject to payment of a 5% or NIS 100 cancellation fee.

The change announced today by El Al follows pricing familiar to passengers not only from low-cost airlines, but also from legacy airlines. "Low-cost airlines are going in the legacy direction, for example by launching passenger clubs, while legacy airlines have realized that passengers want to choose. On a business trip, passengers want a ticket with flexibility for change or insurance, and in the family model, they want the most basic pricing," Strassburger declares, stressing that no change is being made in the basic pricing as it was on UP, while El Al has a built-in advantage over the low-cost airlines because of its slots: most of El Al's flights to Europe take off in the morning and return in the evening.

The pricing model will apply to all seasons of the year, but does not apply to trans-Atlantic flights (at least at this stage). El Al believes that the Classic model will be in highest demand among passengers, and expects to increase  seat occupancy on its planes from the current average of 82%.

"The model enables us to be transparent to the customers," Strassburger explains. "The Israeli character is pushing us rapidly towards the Lite product, but we tell passengers clearly to pay attention to what they buy. I don't want a situation in which passengers say that we pushed them towards the cheapest product, and that they then had to add money for services they needed, so we emphasize that everything is transparent from the beginning. Someone flying with a Lite ticket can save money, provided that this type of ticket is suitable for his trip." Frequent Flyer club members will accumulate the same number of points with all three types of tickets. The accumulation calculation is based on a different algorithm that includes the ticket price, the distance flown, the class of ticket, and more.

Another innovation announced by El Al, which amounts to following the rest of the market, is the introduction of rational pricing for someone buying a one-way ticket. Up until now, passengers buying a one-way ticket paid much more than half the price of a roundtrip. "We realize that there is also demand for this segment. People want to combine trips on different airlines, and want flexibility. Legacy airlines haven't worked this way up until now because it upsets the balance of traffic. Our shelf product is a roundtrip, but we are now showing more flexibility in this respect, too," Strassburger says.

Published by Globes [online], Israel business news - www.globes-online.com - on April 30, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

El Al, photo: Sivan Farag
El Al, photo: Sivan Farag
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