Caravelo’s Subscription-Based Airline Model: A Hit For Passengers

Several carriers have been experimenting with airline subscriptions in recent years. The model is yet to stamp its presence across the aviation industry. However, there has already been a positive response in the market. Caravelo works with the likes of Volaris and Viva Air to offer subscriptions to passengers. Simple Flying recently spoke with the company’s product marketing specialist, Jess Evans, about the reaction so far.

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Volaris was an early adopter of Caravelo’s subscription model, and its customers have been appreciating the provisions on offer. Photo: Getty Images

Making the process easier

Altogether, Caravelo provides solutions to help companies boost profitability by automating customer processes, optimizing revenue opportunities, and creating what it calls hyper-loyalty.

As part of its range of products, it launched a flight subscription model to reward regular travelers with fixed price flights when they pay a set amount each month with either a single or round trip flight each month.

Volaris introduced its subscription program, called v.pass, approximately two years ago. It sought to target younger market segments with a desire to regularly travel. With these audiences flocking to subscription services in the digital realm, the Mexican carrier’s leadership felt that it would be a good opportunity to apply this model to the aviation industry.

Up to 30,000 customers have signed up for the low-cost outfit’s pass. Not including taxes, they can hit the skies each month for a fixed price and are invoiced monthly. For around Mex$399 (≈$20) per month, passengers can fly anywhere on the airline’s domestic routes. Alternatively, they can pay Mex$639 (≈$32) a month for a guaranteed return ticket. Moreover, fliers can add ancillary options to their monthly plans at additional costs.

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Mexican carriers are seeing a decent return in domestic passenger numbers following concerns surrounding the pandemic, several of these passengers would also be users of the subscription service. Photo: Getty Images

Benefits across the board

Caravelo shares how Volaris made a good call by introducing the subscription service. Passengers are enjoying the benefits of this approach across the board.

“The response has been very well, passengers truly understand the benefits and model, the same as Netflix, Spotify, etc. For this, it means they don’t have to worry about fluctuating flight prices, and know how much they’ll be spending each month,” Evans told Simple Flying

“It also creates convenience, they don’t need to each month find a flight on a price comparison site and waste time in this way. They can usually fly up to three days before. For some, it creates the opportunity for them to fly more often to see family or friends.”

As a result of this positive passenger response, operators can significantly benefit. Evans explains that the airline industry is very focused on a transactional model. This traditional approach sees customers purchase the product, use it, and leave. However, the subscription model means carriers get incremental revenue and guaranteed income each month.

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Another Latin American carrier, Viva Air Colombia, is adopting the subscription model. Photo: Getty Images.

A well-rounded approach

In turn, this approach is very attractive to investors as it means they can predict a certain amount of income. It also involves a healthy mixture of business models for airlines. Notably, during the pandemic, many operators with transactional models lost the bulk of their income immediately. However, if they had a better mix of transactional and recurring business models, then many firms wouldn’t have seen such a significant financial impact.

The model also creates hype loyalty. Once a subscription is locked in for a period of time such as 12 months,  carriers have a channel of communication with their customers to cross-sell and upsell. Subsequently, a brand relationship is created.

Speaking of the pandemic, carriers have been receptive to opening a partnership with Carevelo this year. Evans explains that this is because they want to innovate and re-invent themselves. This would help them find new ways to accelerate growth.

The company also noticed that passengers continued to pay for their subscriptions during the downturn in activity. Nevertheless, Caravelo gave customers some leeway amid the challenging conditions. Travelers are waiting to fly again and the firm knows that when they do, they want reasonably priced flights waiting for them.

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Caravelo shares that Saudi Arabia’s flynas is also jumping on board, giving way to a pattern emerging of low-cost carriers adopting the product. Photo: Getty Images

New requirements

With 2021 around the corner, Caravelo is looking forward to exciting new partners and projects. When it comes to its subscription model, it is looking forward to working with other airlines in the next chapter of the aviation industry’s story.

“We’ve run subscription products for several years but airlines are catching up to the benefits, and more recently with the complete stop in revenue for them with [the pandemic], it’s a very attractive offer for the short term but also the longer term, as we look at potential outbreaks and future disruption in the industry.” Evans shares.

“We’re already seeing various airlines globally pick up the model and see the benefits. The airline industry uses a lot of old and complex systems but we are cutting through that noise and bringing direct results to both airlines and their passengers. The more clients we have means we have more insights, so the faster we grow, the better the service will get for both clients and passengers.”

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The aviation market will look considerably different by the time the 2020s are over, and initiatives such as Caravelo’s could become more prevalent as carriers try to adapt with the times. Photo: Getty Images

Wholesale specialist Costco recently announced that it is selling a business jet subscription service. Therefore, there are solutions of this type being provided in both the commercial and private sectors. The airline industry is undoubtedly facing the most unprecedented challenges ever. So, taking on new models could be what keeps many airlines fighting this decade.

What are your thoughts about Caravelo’s airline subscription model? Is this something that you’d like to eventually try out? Let us know what you think of the approach in the comment section.

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