1. Case Study: Air New Zealand
Ruth Lawanson, Yanting Li, Christina Liu

2. Introduction
-Customers with Airpoints, Air New Zealand's loyalty program, will now bid for upgrades instead of paying a fixed price
-Is this a good idea?
-For Air New Zealand
how to measure success?
-For the customer

3. OneUp upgrade program
Customers must visit airline's myairnz.com to request upgrade 7 days before date of travel
sliding scales indicate minimum offer prices and likelihood for a particular offer to be accepted
airline will award the seats to the highest bidders
customers notified 3-7 days before departure

4. The Customer Advantages: Disadvantages:
pay based on what the individual thinks an upgrade is worth, chance for those who normally can't afford
could end up paying less than the fixed price
Disadvantages:
inconvenience, instability (Deweese3)
vigorous bidding could drive up the price and drive out customers
slashing of privileges for most loyal customers (Frequent Flyer)

5. The Airline Advantages: Disadvantages:
high demand for upgrades may lead to bids that are higher than previous prices
enables airline to earn additional revenue from seats that would previously travel empty
100,000 unsold premium seats last year out of 13.1 million passengers carried system-wide
Disadvantages:
inconsistent pricing
stress on upgrade applications
a discounted upgrade price would devalue the airline's product
alienate high value customers

6. Example: Bidding

7. Example: The Old System
*1 Airpoint = 1 New Zealand Dollar
1 New Zealand Dollar = approximately .75 USD

8. Example: Bidding Bidding for this particular flight:
low end of bidding: $360
high end of bidding: $1,570
a bid of $590: very poor chance of being accepted
Fixed Cost on old system:
$360 for standby
$863 for confirmed

9. Online Comments Auction Fan:
No one would want to pay more than others for the same premium.
Keep the minimum bid as low as possible to encourage bidding.
Have winning bids only pay the highest unsuccessful bid.

10. Auction Fan Evaluation
Have winning bids only pay the highest unsuccessful bid.
Advantages for customers:
Winning bidders will be saving money on the difference between their bid and their payment
Since all winning bidders will pay the same amount, equity will be ensured
Advantage for Airline
Bidders will tend to bid at higher prices knowing they will only have to pay the 11th highest bid. This will potentially bring in more revenue for the Airline.

11. Will the Plan Succeed? 100,000 of unsold premium seats last year
minimum possible bid: $200
extra $20 million in revenue
BUT: possibility of losing loyal customers
Already they had successful international trial runs
Our conclusion:
The plan will succeed
But, perhaps they could have gone about this process in a better way
allowed more preferences to elite members
informed members further in advance
utilize other bidding system