Look at the airline price wars of 1992. When American, Northwest, and other U.S. carriers went toe-to-toe in matching and exceeding one another’s reduced fares, the result was record volumes of air travel – and record losses… Airlines such as Delta now offer unsold seats to consolidators and auction houses such as Priceline and Cheaptickets.com. The airlines are selling tickets to price-sensitive customers who don’t care about flight times, number of stops, or frequent-flyer miles.
—Harvard Business Review, How to Fight a Price War (2000)
When this was written, offering discount airline tickets through a third-party was a terrific way of protecting a brand’s reputation. This worked because in 2000, online discounters were a channel frequented almost exclusively by price-sensitive consumers. Today however, 9-in-10 young flyers book through these fare aggregators, signaling yet another price war on the horizon. But what about long-term profitability?
By pulling back the curtain to give young customers a peak at luxury flying – just a taste of the perks of being a loyal Delta customer, we can string them along the path to becoming highly profitable frequent Delta flyers, dramatically increasing their customer lifetime value (CLV).