Flying My Parents to Australia for £499

As a director of Airtours, I was fortunate enough to earn a healthy basic salary of £120k, but we also received annual bonuses of up to 50% of salary and participated in long-term incentive plans linked to the Airtours share price.

I mention this not to boast, as I am sure plenty of our competitors paid their directors considerably more, but because David Crossland had an interesting attitude towards bonuses. Despite Airtours becoming a major PLC, its entrepreneurial culture never really disappeared, and David would regularly challenge me to bet all of my bonus on the success of projects I was proposing on a double-or-nothing basis.

His logic was simple. If I was so convinced something was going to work, why wasn't I prepared to put my own money behind it?

By then we had added long-haul Boeing 767s alongside the MD83s that formed the backbone of the airline, but we were struggling to find enough hotel capacity in places such as Florida and the Caribbean to justify adding substantially more winter flying.

I therefore brought my own experience into the conversation.

I had travelled around Australia during my world tour and knew my 50-year-old parents would love to follow in my footsteps. The problem was that Australia remained an expensive destination that ordinary package holiday customers like my parents simply wouldn't consider.

So why couldn't Airtours change that?

Taking the normal Crossland approach, I started with the price rather than the cost.

I told Mike we needed a headline price of £499, with most customers realistically paying around £500-£600. Where exactly I got those numbers from I have absolutely no idea, but I knew our customers and was convinced that at £499 the seats would fly out of the door.

Mike loved the idea, but operationally, flying to Australia was slightly bonkers given the aircraft we operated.

The journey took around 22 hours and required two stops, Dubai and Singapore, before eventually reaching Sydney. One aircraft could effectively spend an entire week transporting just three loads of customers backwards and forwards, rather than operating the much higher volumes we were used to on normal winter routes.

Mike's biggest concern was having expensive and essential flight crews stranded in Australia for extended periods. So we applied another piece of Crossland logic.

If operating one aircraft created a problem, operate two!

I obviously booked my parents onto the inaugural programme, and at the £499 lead price they travelled to Australia for 28 days, including spending a week with my auntie in Adelaide, something they had always talked about doing but realistically would probably never have done without Airtours making Australia affordable.

Fortunately for my bonus, the first flights sold out within days, but unfortunately, we had also poked a rather large hornet's nest.

Our £499 pricing triggered a price war and scheduled airlines responded aggressively. They could operate more suitable aircraft with only one stop, and once they brought their fares down, the advantage of sitting on an Airtours charter aircraft for 22 hours via two stops became considerably less attractive.

We looked carefully at the economics and decided not to repeat the programme the following winter. Commercially, therefore, Australia wasn't one of Airtours' great long-term successes.

But it taught me something that became incredibly valuable during the rest of my career.

I understood the Airtours customer.

People who had previously regarded Australia as somewhere they might visit “one day” suddenly booked it within days because we put £499 in front of them, with my parents being perfect examples.

Sometimes customers are far more adventurous than businesses give them credit for.

You just have to get the price right.