The Business of Selling Upgrades

Plusgrade is helping airlines sell premium seats to a new class of leisure travelers.

Dear readers,

Just before the pandemic, I became a regular on SAS' transatlantic flight from Los Angeles, not because I enjoyed the product (in fact, I did), but because I realized the airline would accept every reasonable bid I made to go from economy to business class. Who wouldn’t like a $500 flatbed suite?

The platform was powered by Plusgrade, a nearly 15-year-old Canadian company that says it will help airlines capture roughly $5 billion (U.S.) in ancillary revenue this year. In an industry in which many smart entrepreneurs fail because few airlines want to experiment with unproven technology, Plusgrade has broken through.

When its CEO Ken Harris signed up as a founding member to The Airline Observer, I asked for an interview, if only because I enjoyed using the platform. Plusgrade has been on an acquisition binge recently, buying Points.com last year for $385 million and UpStay, a revenue management platform for hotels, earlier this year. It's part of the company's plan to grow beyond upgrades and "to become an ancillary revenue powerhouse" across the travel industry, Harris said.

But most of us know it as the upgrade company, and for good reason. Before Plusgrade formed in 2009, airlines struggled to turn empty seats into cash. Airlines might ask agents to make an offer over the public address system. Or they might only sell upgrades if customers asked. Now, whether they build the technology themselves or use Plusgrade, paid upgrades are a reliable part of the revenue pie, even more than before the pandemic. People are willing to pay a lot for those cushy seats.

“The bids are larger, and the activity is way ahead," Harris told me.¹

I wanted to know how the platform works, and what insights Harris could share about consumer behavior, airline revenue, and the challenge of persuading airline executives to adopt new ideas.

Here are six interesting themes from our discussion: