Major airline bets on free alcohol to win over customers

Competition in the airline space is fierce. The industry suffered a major blow during the pandemic, leaving plenty of airline carriers still vulnerable and in recovery. 

Some of them succumbed to the challenges and filed for bankruptcy, while others are coming up with creative ways to stay afloat.

Despite many consolidation moves in the airline space over the past few decades, competition has not softened, and the challenges have not abated, writes Teresa Rivas for Barron’s.

One example is Spirit Airlines’ failed merger with another budget carrier, Frontier Airlines, in 2022. Since then, the carrier has filed for bankruptcy twice.

Since 1960, the five biggest U.S. carriers, Alaska Air Group, American Airlines, Delta Air Lines, Southwest Airlines, and United Airlines, have merged with and acquired more than 40 other smaller airlines.

Despite this consolidation, the market has remained highly competitive. Bernstein analyst David Vernon said that although it is “slightly counterintuitive to the consolidation narrative,” he said, “airline competition is alive and well.”

There are plenty of low-cost airlines now, fighting for their own place in the sky and keeping the rivalry active. These carriers often come up with innovative offerings and perks for their customers.

Case in point: Air Canada has just announced major benefits for its economy flyers.

Air Canada to serve free beer and wine on every flight

On October 1, Air Canada announced it has upgraded its Economy travel services by adding complimentary beer, wine and exclusive Canadian-made snacks. 

The carrier launched these upgrades on September 1, benefiting all passengers on all flights, including routes to Mexico and the Caribbean.

Related: Spirit Airlines gets a major lifeline amid flight cancellations

Scott O'Leary, vice president, loyalty and product at Air Canada, stated:

As part of our commitment to elevating the onboard experience, we’re delighted to introduce even more exciting new options to our menus. These upgrades offer something for everyone and proudly showcase Canadian brands so that our customers can sit back, relax and kick-start their travels no matter where they’re going.

New Air Canada drinks and snacks:

• Morning flights: MadeGood Mornings Cinnamon Bun Soft Baked Oat Bars, TWIGZ Craft Pretzels, and Leclerc’s Celebration Cookies
• Toronto-Downtown Billy Bishop flights: Greenhouse’s Ginger Defense Wellness Shots
• Expanded Air Canada Bistro: Summer Fresh Hummus & Crackers and Quaker Maple & Brown Sugar Oatmeal Cups, new TWIGZ Sour Cream & Onion Pretzels, and Smarties
• Crisp New Pour: Heineken 0.0 (nonalcoholic)

With this new offering, Air Canada became the only North American airline to serve nonalcoholic beer and free alcohol in economy class on all flights.

Food and beverage as a means to win over frustrated customers

At a time when many North American airlines face traveler pushback over extra fees for baggage or legroom, Air Canada decided to focus on food and beverage experiences.

In an interview with Reuters, O'Leary explained why:

Food and beverage just tend to have a disproportionate impact on customer satisfaction, more than any other attribute of our products and services.

More Airlines:

• Airline cuts last flight into this US city, refunds available
• TSA issues stern warning on item over 13 million Americans use
• Spirit Airlines cuts more flights and jobs amid second bankruptcy

O’Leary’s knowledge of passengers habits aligns with a CheapFlights survey that revealed:

• 37% of respondents confirm drinking on the plane.
• 20% of Americans will only partake when they don’t have to pay.

The Air Canada executive added that absorbing expenses for beer and wine is more affordable than eliminating baggage fees:

That's just not something that's easily waived or given to everybody without having to have some impact on ticket price.

In 2024, frustrated passengers, including those flying Air Canada, took their anger to social media over additional fees for luggage and seat arrangements in economy classes.

Travel from Canada to the U.S. is down, but airlines are optimistic and competitive

As revealed in a report from Statistics Canada, in June, the number of Canadian resident return trips from the United States dropped 28.7% year over year, and the number of trips to Canada among U.S. residents declined 5.8%.

However, several major airlines are optimistic that travel between the two countries will improve, so they are making moves to expand their U.S.-Canada travel offerings and attract more passengers in that market.

For example, American Airlines recently partnered with Porter Airlines on a new codeshare relationship, providing customers with more traveling options between the United States and Canada.

O’Leary said free beverages could help with "sixth freedom flights" that take U.S. travelers to Europe or Asia via Air Canada’s home country. These flights represent the right of an airline to transport passengers or cargo between two foreign countries through its own home country, acting as a connection point or “hub.”

Our ability to offer a degree of differentiation that sets us apart from literally every other airline that we're competing with on those routes was very important to us.

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Related: United Airlines adds game-changing perk to win over customers