The most profitable seat for airlines
Not quite economy class, not quite first class -- 'premium economy' is the latest way airlines are trying to wrangle a few more of your travel dollars.
This post comes from Daniel Michaels at partner site The Wall Street Journal.
For fliers, the ideal seat is usually in first or business class. For airlines, the sweet spot on long-haul flights is, increasingly, farther back in the plane.
A new hybrid class, called premium economy, is appearing on more planes due into its attractive economics. The seats generally give passengers a bit more space than traditional coach and often come with extra amenities like better food.
Tickets are pricier than for basic economy, but still much cheaper than flying up front.
For carriers, the whole package costs much less than business class. That means they only need to spend a bit extra to generate higher fares than tourist class and can still pack in seats. Airline executives say it can be the most profitable cabin.
The favorable equation is part of what prompted Deutsche Lufthansa to start rolling out a new premium economy section on all intercontinental flights as of this coming October.
"It will be a very profitable product," said Jens Bischof, Lufthansa's chief commercial officer.
Airlines, like passengers, fret about space. Fliers want as much elbow and knee room as possible, while carriers want to make optimal use of each square foot. Lufthansa's new seat gives passengers up to seven extra inches to stretch their legs, and four more inches at shoulder-height because each row has two fewer seats than in traditional economy class. There are no shared arm rests.
Lufthansa's new seat takes up about 50 percent more floorspace than a traditional economy seat. The incremental cost of other extras, such as one additional checked bag, meals served on china tableware and an amenity kit, is proportionally less, Mr. Bischof said.
A round-trip premium economy ticket will average €600 ($824) more than basic economy. Lufthansa doesn't disclose average economy-class fares.
Business-class seats, meanwhile, use three times the area of standard economy seats and round-trip fares are €2,000 higher on average, Mr. Bischof said.
Travel website TripAdvisor estimates premium economy fares range from double to four times the lowest economy fare, while business fares can reach 10 times the cheapest fare. Andrew M. Wong, regional director of TripAdvisor Flights in Singapore, said premium economy is "a good compromise" for business fliers whose travel policies don't allow business class.
Boeing Co. now delivers more than 30 percent of its top-selling 777 intercontinental planes with premium economy seating, and the proportion is rising, said Kent Craver, a director of cabin experience and revenue analysis at Boeing. Ten years ago, no new 777s had the seating.
Even more old planes are being updated with premium economy, although the total isn't tracked. Lufthansa, for example, plans to install the cabin by late next year on 106 long-haul planes, most already in its fleet.
"There definitely has been a significant uptick in the installation and interest in premium economy," said Mr. Craver. "It's one of the hottest topics we discuss with airlines."
Excitement built slowly, though. Virgin Atlantic Airways Ltd. introduced the first enhanced economy section in 1992, "aimed at the cost-conscious business traveler," said a Virgin spokeswoman. Almost a decade later, rivals including British Airways, now a unit of International Consolidated Airlines Group, copied the concept.
By 2009, about a dozen airlines offered special economy service and today almost twice as many do, said Chris Emerson, senior vice president of marketing at Airbus Group. "Flights are fuller than ever, so there's a renewed interest in capturing high-fare traffic," Mr. Emerson said.
Products vary widely, though. U.S. carriers and several others only give some extra leg room and use basic economy seats. Perry Cantarutti, a senior vice president at Delta Air Lines, said the layout works well for the carrier's network and "space is what customers say is the primary benefit." At the other extreme, Air New Zealand offers seats that can become beds.
"It really is all over the board," said Mr. Craver at Boeing.
The trend has gathered speed due to widening differences between the front and back of international airliners. Over the past 15 years, most global carriers have upgraded their business cabins with seats that spread out into flat beds. These are so luxurious that most airlines have ditched first class.
To make room for these loungers, airlines have squeezed coach class. First they compressed rows by shaving knee space. Now many are wedging an extra seat into each row, although Lufthansa has no plans to do that, Mr. Bischof said.
The German carrier considered introducing premium economy twice before and its hesitation shows the cabin's potential downside. Airlines want economy fliers to buy pricier seats, rather than business travelers opting for cheaper ones. Only after Lufthansa in 2012 began upgrading its business class to horizontal beds from slanted ones was it confident of not cannibalizing its own premium traffic.
"You ask yourself, isn't there a down-sell risk," said Mr. Bischof. "I see the up-sell potential as significantly higher."
Mr. Craver at Boeing said premium economy's rise mirrors the emergence of business class in the 1980s. Then, the gap between coach and first was wide. Today, business class seats are cushier than first-class seats a generation ago.
Now airlines are coming full-circle to three-class configurations again, Mr. Craver said. "Premium economy is kind of the new business class."
More from The Wall Street Journal
When am I going to be able to sit in a reasonably comfortable seat for a reasonable price?
I don't want to pay hundreds extra for 3 more inches. Take that extra space and make each seat on the plane 1.5" longer and wider. Then you can fit more people in the plane. I only fly for vacations, and it is always the worst experience of the trip.
I hate all the business people budging in front of the line so they can board first and sit in the front row. Planes should board by Row only. Starting with the rear. Then I can enjoy my extra legroom in the terminal for 10 more minutes rather than being jammed in the plane while everybody else boards.
One last complaint - airlines need to enforce the bag size limit. If it doesn't fit in the little holder by the gate- then you pay to check it. I don't care that you can jam your duffel bag in there when its empty, its full now and its taking up space for my properly sized carry on.
Thanks for listening to my rant.
Nothing new here, I've been flying in this economy-deluxe class on EVA-air from US to Asia since 1994. Used to be great deal for passenger, 3" more elbow room and 4" more leg rooms for $150 more round trip, now it's $700 more than regular economy, ouch. Don;t care that much about so called better food.
Lufthansa needs to hire friendlier flight-attendants before worrying about seat configuration.
Why cant the airlines get these seats right? How about installing something similar to an adjustable car seat? Why should we all continue to travel in pain?
The most profitable seat for airlines...The individual who sheds a tear for the airlines and/or drowns in the cool aide.
The industry is filled with mismanagement. Employees are overpaid based on market demands (they couldn't match their earnings potential and/or quality of life anywhere), industry is filled with pay inequality (individuals getting paid 2 to 3 if not more for comparable work of others), inept business decisions (management picks and rolls with inferior ideas in spite of the evidence).
Passengers don't get more; they just pay for industry mismanagement. Wall Street likes having their pocket picked.
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