Capital A, the company formerly known as AirAsia, is jumping on the electric air taxi bandwagon with an order for up to 100 of the aircraft for its ridesharing platform in Southeast Asia. The order affirms the global race to add air taxis to bridge the last mile between airports and city centers and cut airlines’ carbon footprints, but raises significant questions about whether regulators will approve the technologies in time to meet the industry’s ambitious goals.
The airline signed a memorandum of understanding with lessor Avolon for 100 Vertical Aerospace VX4 electric vertical takeoff and landing (eVTOL) aircraft. Last year, Avolon ordered 500 eVTOLs from Vertical in deal worth $2 billion. The lessor has now placed 90 percent of that order with airlines, with 250 to Brazil’s Gol and 100 to Japan Airlines.
AirAsia will allow passengers to book flights on the VX4s through its “Super App,” and as part of the company’s new ridesharing service AirAsia Ride in Malaysia. The move is part of the company’s rebranding as a digital-first travel and lifestyle company, rather than an airline that offers adjacent services. Among the examples of this strategy include allowing passengers to book tickets on other airlines, and letting merchants schedule e-commerce package deliveries all through its mobile app.
“We are now much more than just an airline with over 20 products and services on our super app leveraging off each other including flights, hotels, food, retail, delivery, ride hailing and more,” Capital A CEO Tony Fernandes said in announcing the deal with Avolon. “In the VX4, we have identified what we believe will be the eVTOL aircraft of choice and we are thrilled to be the launch airline for the aircraft in Southeast Asia.”
Fernandes did not offer a firm timeline for when the VX4s will join the fleet or be in service but said they are expected to be in service by 2025. Vertical Aerospace has said the VX4’s first flight is expected this year, with regulatory approval expected by the middle of the decade. This tracks with what its competitors, including Archer, Wisk, Embraer’s Eve subsidiary, and Airbus have said of their own eVTOLs. Yet no regulator in the world has approved an eVTOL for passenger flight, and electric propulsion remains largely uncertified for passenger operations. It is important to note that the certification process for conventional aircraft powered by gas-turbine engines can take several years.
Vertical’s VX4 is piloted, and is capable of carrying four passengers up to 100 miles at 200 miles per hour. The company counts American Airlines and Virgin Atlantic Airways among its customers. Vertical raised $300 million through a SPAC listing on the New York Stock Exchange in December.
Vertical CEO Stephen Fitzpatrick said he is “thrilled” by the AirAsia deal and to be “be bringing zero emissions flight to people all across Asia.”
Alaska Rolls Out Flight Subscription Service
Alaska Airlines last week began selling pay-as-you-go flight passes in a move that hops on the popularity of the subscription model. Travelers who agree to pay a monthly fee will receive credits to fly a fixed number of roundtrips among 16 western U.S. airports.
“In our basic plan, we’re introducing affordable travel on par with an Uber ride or bar tab,” said Alexander Corey, managing director of business development and products.
A basic subscription starts at $49 a month and requires booking tickets at least two weeks before travel. A more flexible subscription starts at $199 a month and allows same-day booking. Subscribers can fly on routes within California and to Las Vegas, Phoenix, and Reno, covering about 100 daily flights.
“We designed the product by trying to create something our California guests have told us they needed,” Corey said. “In our data, 3.5 times more people travel within California than within any other state.”
Once consumers have selected a plan, they can choose their volume of flights, such as six, 12, or 24 a year. A basic plan with six flights typically costs $763 a year — after taxes and fees. A yearlong commitment works out to a total travel expense 20 to 30 percent below average fares across the system, Corey said.
For now, Alaska will only offer subscriptions through its direct channels. That’s a natural fit because subscriptions are ultimately about getting a closer relationship with customers. Subscriptions also reduce the money an airline needs to spend to acquire a customer per booking because they encourage repeat usage.
Some airlines have offered membership-based programs for some time, such as United Airlines long-time offering of subscriptions to access at its lounges and to other products. But Alaska’s program is one of the most sophisticated — or most Netflix-like — of the subscription efforts seen yet from an airline.
Caravelo, a Barcelona-based travel tech vendor, is helping Alaska on the back-end. It has plugged into the carrier’s passenger service system, run by Sabre, to make or amend bookings. Since 2018, Caravelo has run a subscription offering on behalf of Volaris. The Volaris VPass lets more than 30,000 consumers fly within Mexico once a month, paying only taxes when they book in return. Plans vary, but the monthly subscription for round-trip tickets is about $35 (699 Mexican pesos) a month.
During the pandemic, Volaris said its subscription revenue remained steady, which indicated people kept paying. However, subscription sales remain a small part of the airline’s overall revenue.
Five months ago, South African low-cost-carrier FlySafair launched a flight subscription program providing a select number of customers with up to 10 free flights per month. JetBlue Airways and other airlines have also occasionally run promotions where customers pre-pay for multiple vouchers at a volume discount or buy a pass with “all you can fly” privileges. But some people don’t call those true subscription products.
Other airlines looking to specifically add a subscription product may choose to use a subscription platform from a tech vendor that has practice handling recurring payments, billing, and fraud detection. “Airline subscriptions will usually have restrictions, unlikely Netflix, which doesn’t have a quota on how many movies you can see,” said Caravelo CEO Iñaki Úriz.
The nuances of the travel sector require a nuanced tech stack. “The subscription platform an airline uses needs to understand, let’s say, that you as a customer are subscribing to this X part of the airline’s network and not this Y part of the network,” Úriz said. “Maybe your subscription is going to include some ancillaries, such as free checked bags, but not others. Your program will probably also have some revenue management rules, such as that consumers must book all flights by a certain number of days out.”
For example, when redeeming, an Alaska subscriber will pay nominal taxes and fees, such as an airport security fee. Credits for flights are deposited monthly or bi-monthly, depending on the plan, and need to be redeemed within windows of time, typically between one and two months.
To keep things simple, Alaska is applying its standard practices for traditional tickets to the flights booked via subscription, such as how miles add up in the airline’s loyalty program and the use of elite upgrades. Subscribers also get access to main cabin seats rather than basic economy ones.
“We thought about things a little bigger picture, and less transactionally, than is the industry norm,” Corey said.
Technology Briefs
- Delta Air Lines added a new buy-now, pay-later feature from its credit card partner American Express to the booking process on its website and app last week. The offering allows travelers to select one of three plans to pay for tickets in installments over three to 24 months. Delta Senior Vice President of Customer Engagement and Loyalty Dwight James said the feature gives travelers more flexibility, and helps the carrier attract — and hopefully retain — more younger travelers, including millennial and Gen Z flyers. “The more we can make our program, our card benefits attractive to our customers, revenue is going to follow,” he said.