Taking a cue from the cellphone industry, an upstart South African
airline is selling flights by the minute and allowing customers to buy
tickets and book flights via text message.Airtime Airlines takes to
the sky later this month, offering three flights a day from its base in
Durban to Johannesburg, Cape Town and Port Elizabeth. Passengers
purchase minutes much like they would for a prepaid cell phone and
redeem them for a ticket. Fees are assessed according to the length of
the flight – say, 75 minutes for the run from Durban to Johannesburg –
and could save as much as half of what competing airlines charge.
Here is the article. It’s not yet clear whether they have managed to lease planes, but here is another part of the business plan:
The cost for Airtime minutes can fluctuate, presumably according to
promotions and market factors, so topping off
becomes an exercise comparable to fuel hedging. Buy a big block of
minutes when you think they’re at their cheapest and you look smart,
unless the price drops again the next day. Then again, it might go up.
The price recently rose from 3 Rand to 5 Rand, meaning the cost of a
round-trip flight from Durban to Cape Town climbed from about 750 Rand
($81) to 1,250 Rand (about $134). Still that’s cheaper than the $200 it
would cost on South African Airlines.
But can you sell minutes short? I thank Christopher Balding for the pointer.
I wonder if they fact that flights do not always take the same number of minutes will be a problem for them. I could definitely see angry customers demanding minutes back since a tailwind put them in 15 minutes ahead of schedule.
@aceofspadesky “Minutes” per flight are set in advance, not based on actual flight time.
If the only way to change prices throughout the year are with per minute cost (assuming the minutes used per flight stays constant), then they can’t vary prices of flights at peak times and have to use an average price. That means tickets will cost too much during the typical day but will be too cheap during holidays. I can’t see how this pricing scheme is an advantage except for the airline may get cash sooner (stored minutes) and there will be unused minutes. And I guess once someone is in the system, they have motivation to not use the other airlines. I susect they’ll give out the first minutes free to get people hooked, but I still don’t think they will have a chance verse the normal pricing scheme.
I don’t see this working for very long, if at all.
If most of the variation in ticket prices was because the fuel price peaked at christmastime, then this would make some sense, they could take your money in whatever month and buy fuel futures. But this isn’t the case, airlines vary the prices because this maximises revenue, given a fixed capacity per flight, by charging more for more popular flights until they’re all about equally full. And I can’t seem them being able to compete here, charging the same price for all flights. Either they fly empty half the time, or they give away peak-time seats to those who just happened to book first.
what if i only have enough money for the first half of the flight? can i jump off in the middle?
It certainly provides a perverse incentive for the airline to slow their planes down a bit.
First, they advertise how many minutes a flight costs – it doesn’t cost more if it’s delayed. Second, I’m sure these times are approximate flight times, adjusted so that the ratio of “times” is the ratio of costs. This is easy to do, they’re not offering one-hour and overnight flights, only 1-2hour hops.
The big problem is that they can’t milk those who really have to fly today for what they’re willing to pay, and so they’ll have to make up for that by charging everyone else more, so they’ll fly with other airlines.
Perhaps it’s a marketing ploy: they do say they’ll also sell normal tickets, and don’t say how many of each. Perhaps handing out some tickets like this (at about the same price as the kind you can book long in advance, so they’ll sell out together) is worth it as an advertising stunt.
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