The airline debuted the sales in early August on the roughly 26 minute flight between Rio de Janeiro and Sao Paulo, with a price starting at 25 Brazilian Reals ($12.32).
Commenting on the new initiative, Gol’s recently-appointed new CEO Paulo Kakinoff explained the move was designed “so that passengers can choose to travel with more comfort or space”.
Queried by the APEX Editor’s blog about the potential to expand the offering beyond the Rio-Sao Paulo shuttle flights the carrier stated: “The public is accepting the project very well, so Gol is studying the expansion possibility, but nothing is definite/planned as of yet.”
The combined load factor of Gol and Webjet, a smaller domestic Brazilian carrier acquired by Gol in 2011, for the second quarter of 2011 was nearly 70% on the joint fleet of Boeing 737-300s/700s/800s operated by the carriers. Asked if Gol had any concerns that blocking the middle seat on the first row from regular ticket sales would trigger the potential for lost revenue, the carrier remarked that “the revenue is being carefully studied, and no reason for doubt has arisen thus far”.
In some ways Gol’s decision to block off the sale of the middle seat in the first row could the be the carrier’s answer to offering more space without undertaking costly aircraft reconfigurations. The move also appears to be a low-risk method for Gol to test Brazilian consumer appetites to pay small premiums for additional space, and their reaction to various product unbundling strategies.
Kakinoff, meanwhile, stresses that Gol is “still on the lookout for new opportunities for revenue generation”. Boosting ancillaries to drive more overall revenue per passenger could be more pressing for the carrier in the current operating environment as Brazilian domestic demand began to soften in late 2011 and continued into 2012. Gol and its main Brazilian rival TAM throughout 2012 have both revised their domestic capacity estimates downwards, and Gol now expects its domestic supply to decrease between 2% and 4.5% during 2012.
Even as Gol navigates weakening Brazilian domestic demand against a backdrop of Brazilian GDP growth projections that have fallen from 4% to 2% for 2012, the carrier continues to look for ways to increase ancillary revenue. The carrier’s ancillary revenues grew at a compounded annual growth rate of 40% between 2005 and 2011, and accounted for roughly 12% of Gol’s overall revenues during the first quarter of 2012.
Kakinoff also remarks that Gol has recently expanded its buy-on-board scheme, which the carrier launched in June of 2009 with the sale of food and beverages. Onboard sales, including the middle seat initiative, could rise in prominence in Gol’s overall ancillary revenue strategy that encompasses a cargo business, its Smiles loyalty programme and other additional services.
In what Kakinoff describes as a “tough competitive environment” every penny from incremental non-air sales counts, and Gol appears prepared to try new product unbundling if the company’s latest initiative proves successful.