People pay for newspaper subscriptions, mobile phone service, and gym memberships on a monthly basis – why not airline travel?
A startup called OneGo is ready to apply that model to the skies, hoping to attract business travelers with some measure of financial predictability – and savings – in the often chaotic world of airfare prices.
The company’s other pitch is simplified booking: when a potential client suggests a lunch meeting tomorrow in Chicago, for example, those last minute fares won’t hurt. OneGo launched its mobile app on Monday, and plans to make it available at Apple’s app store March 1. An Android OS version is also planned.
“By eliminating those factors like price and payment, you really allow people to focus on where they need to be,” says founder Paulius Grigas. “You let them focus on their needs.”
Using seven of the largest U.S. airlines, OneGo partitions the country into four regions. The service charges $1950 per month for flights in any of three zones, while a month on the West Coast costs $1500. A nationwide plan comes to $2950 monthly.
For this business model to work, OneGo has to ensure that its pricing can encompass a range of last-minute fares and additional fees involving an initial 76 airports, which includes all the big U.S. cities. The company also covers several smaller destinations, such as Aspen, Colo., Lubbock, Tex., Pensacola, Fla., and Savannah, Ga.
Prepaying for flights and locking in fixed costs is hardly a new idea in the airline industry. American Airlines Group Inc., United, Air Canada, and others offer such products. American’s AirPass program begins at $10,000 and offers discounted rates on last-minute, full-price tickets, which can be attractive to business travelers who may not know what trips their future will hold.
Under OneGo’s basic plan, you’re allowed to hold four reservations at any one time, and trips must be booked seven days in advance. Things such as baggage fees and cabin upgrades aren’t covered. For an additional $750 per month, you can hold up to a total of eight reservations.
Certain options cost more. On the national plan, for example, adding the ability to book last-minute flights costs $1950 more per month, and unlimited flight changes cost $950.
OneGo is betting it can attract enough users so that airlines will offer it the volume discounts they give major corporations that steer employees to specific carriers. The company is small, so it needs to build a track record before it can seek out such discussions, says Grigas, who adds that he invested $1-million of his own money in OneGo.
A former corporate turnaround specialist in Lithuania, Grigas concedes his company will lose money on occasion, given the travel patterns of the most hardcore road warriors. But longer term, OneGo is betting not everyone who spends $1950 per month for a subscription will fly the equivalent of $1950 per month. (That’s the actuarial model that keeps insurance companies, and your local gym, afloat.) And just like your gym, OneGo’s service renews automatically until you cancel.
Carriers have used all-you-can-fly promotions to fill seats that might otherwise stay unsold during off-peak travel periods – and to generate buzz among leisure travelers. JetBlue Airways Corp. has sold a flying pass on two occasions. Its initial program offered unlimited autumn travel for 31 days at the price of $599 in 2009. The second version, a year later, was more restrictive; prices ranged from $499 to $699, depending on travel days. That program and others like it were aimed primarily at leisure travelers.
In the early 1980s, when it was hunting for cash, American sold a $250,000 pass that offered unlimited first class travel for life. That became a fiasco for the airline.
OneGo says it can save business travelers time because it will focus only on the best flight schedules and avoid wading through nonstop and connecting options, all with different prices. Grigas said his team has tested the model for 15 months, stressing it with a variety of airfares and road warrior booking approaches. “Every day we have more confidence,” he says.
Still, prepaid flying may remain a niche product because no one really trusts the complex (and often infuriating) software that sets airfares: a $200 fare right now might fall to $175 in 20 minutes. So, like playing the lottery, a belief in luck of the draw may dissuade some travelers from giving airlines money before they truly need to fly.Report Typo/Error