Is Buy One Get One Free The Next Big Thing For Low-Cost Carriers?

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Yesterday, Dallas-based Southwest Airlines launched a nifty little buy one get one free promotion. They called it unprecedented. Under the terms of the deal, if you buy a flight ticket, you can take along a mate for free. It’s a gussied-up half-price offer.  But unlike a standard half-price offer, this deal gets two people on the plane. For a low-cost carrier like Southwest, that’s two people buying overpriced watery coffee. They typically get more ancillary revenue from two people than one. It’s a smart play by Southwest Airlines.

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Southwest is offering a buy one get one free deal. Photo: Getty Images

Southwest Airlines follows the lead from premium carriers

Despite Southwest calling the offer unprecedented, these types of offers are reasonably common across the airline industry. Last week, Alaska Airlines ran a buy one, get one free offer. Emirates ran a similar offer over Valentine’s Day. Granted, neither airline is a low-cost carrier, but the deals are out there.

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Traditionally, low-cost carriers haven’t bothered much with two for one offers. They pitch their base fares low enough to make such offers mostly redundant. That’s doubly so if you are in the short-haul business, like Southwest.

Across the Atlantic, Ryanair has a similar offer to the Southwest deal. Ryanair’s offer applies to Value Fare bookings with more than one passenger and covers 1600 routes across its network. It’s a bit of a flash sale though and only available today, September 24.

Tough times force innovation to get people into the air

But these are not regular days for the airlines. In July, Southwest’s CEO, Gary Kelly said;

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“One of the hallmarks of Southwest has been our preparedness—for the unexpected. Recessions, wars, oil price spikes, terrorism, brutal competition, you name it. This time “the unexpected” turned out to be the worst crisis by far in our history.”

Against this background, Southwest has kept flying. Arguably, it has been one of the more innovative airlines in dealing with COVID and its impact on aviation.

“Hopefully, traffic demand will recover and match that capacity; remember it’s currently running down 70 %. We need to double the traffic from here to break even and close to triple to be profitable.

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“Travel demand, usually steady and predictable, is erratic and reactionary to COVID news.”

Tough times call for drastic measures. Getting that passenger numbers up is one of the drivers of Southwest’s buy one get one free offer. They won’t make much money, or any money, from selling the two seats at a substantial discount.

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The buy one get one free offer is all about generating ancillary revenue for Southwest Airlines. Photo: Getty Images

It’s not about boosting your friendships, it’s about ancillary revenue

Southwest Airlines sits at the premium end of the low-cost carrier model. They don’t, for instance, gouge you when you check-in a bag. But let’s say you’re a young enterprising chap who thinks he might impress a potential new partner with a few days in Hawaii once the entry requirements there ease up. The potential new partner is not going to be impressed if you don’t pay extra for early boarding to get a decent seat. It’s a few hours out to Hawaii, so maybe a couple of weekend away G&Ts onboard are appropriate with a toastie or two to soak it all up. Thanks for coming, says Gary Kelly, we needed that money from all the extras you just paid for.

That’s where this is a smart move. The opportunity to pick up extra ancillary revenue from that passenger flying “free” increases at other low-cost carriers. Airlines like Frontier and Spirit are far more aggressive on the ancillary revenue front than Southwest Airlines.

It makes Southwest’s latest buy one get one free offer interesting for all sorts of reasons. The offer will generate extra passenger traffic, which all the airlines need. It creates the perception of value, but Southwest will have run the numbers – they don’t give stuff away needlessly. They’ll be confident this deal works as well for them as it does for potential passengers. Whether buy one get one free is the next big thing for low-cost carriers remains to be seen.

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