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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.

By Money Staff Mar 5, 2014 1:58PM

This post comes from Daniel Michaels at partner site The Wall Street Journal.


The Wall Street Journal on MSN MoneyFor 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.


Courtesy of The Wall Street Journal

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.


Senior Couple Sitting Together on a Plane © Digital Vision/Getty ImagesBy 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

109Comments
Mar 5, 2014 4:57PM
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I guess the next thing the airlines can charge us for is toilet paper.  They will supply the base grade see through paper that feels like sand paper OR if you swipe you credit card in the bathroom for an additional $2.50 you can get the fluffier paper to wipe with.
Mar 5, 2014 6:17PM
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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.

Mar 5, 2014 6:23PM
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Flying any carrier in any seat just plain sucks balls nowadays
Mar 5, 2014 3:01PM
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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.

Mar 5, 2014 5:46PM
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The most profitable seat for airlines? Any seat with a butt in it. Any seat w/o loses money. Duh.
Mar 5, 2014 5:57PM
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How about we just get an extra wide chair for those who can't fit in a normal one. I'm not a fan of someone spilling over the arm rest into my seat. Oh and yes it should cost more, airplanes need "lift" to get in the air and the weight of the plane opposes this which burns more gas. I'm not here to tell you how to live but lets at least make you and me comfortable at your expense not mine. 
Mar 5, 2014 6:26PM
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there is a fix for the full overhead bins. One carry on and that is IT. It must be able to fit in the test rack. When I do go on the plane and I get to my seat, I DO put my bag in the bin marked for my seat. If it is already full because some one else put their bags there I fix it real quick, I pull their bag out and set it on the floor. I paid for that seat and that bin spot. they get upset, tough ****.
Mar 5, 2014 7:08PM
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And flying used to be fun.  Now the entire experience is like riding a greyhound.  At least Greyhound doesn't have morons groping me.
Mar 5, 2014 7:24PM
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So in other words they took the extra space from us over the last few years in order to cram more seats in to boost the bottom line, turning us normal, non-rich passengers into sardines, so they can now charge an extra $600 (Israel to Seattle) to give you back what they have already taken.  I understand that business travelers have to travel but I think we should organize a 1 year boycott of leisure travel to show the money grubbers what we think of their shameless profit grabbing.  Anyone want to join me?
Mar 5, 2014 5:45PM
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Being over 6' tall, I've paid extra for longer shoes, longer pants and shirts, and airline seats. It's a way of life for me.
Mar 5, 2014 5:49PM
Mar 5, 2014 5:57PM
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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?

 

Mar 5, 2014 7:58PM
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I see that Air Canada make a wider seat for premium.... I like many people am short and stout....17 inches is the standard seat.....that size is derived from the average size of a "bottom in 1946 for WW2 fighter pilots.... People today are generally larger than WW2 pilots... for tall people extra leg room is important.... but there is whole other group where we would pay a premium for wider seats....19-20 inches...
Mar 5, 2014 11:58PM
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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.

Mar 6, 2014 10:21AM
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I work for an airline seating manufacturer and I'll tell you that your measurements are wrong.  Seat pitch is not measured from the seat back to seat front; seat pitch is measured fron the front stud of the track fitting in one seat to the front stud of the ttrack fitting of the next seat.  To get a correct measurement in your picture, the measurement should be taken from the perceived center of the front leg of one seat to the same point on the next seat. So as bad as folks may think passenger space is, your pictures have exaggerated the space.
Mar 6, 2014 2:37AM
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Next they'll be installing bunk bed style seats and charging more because you get to see everything from an aerial view.
Mar 5, 2014 6:47PM
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I frequently by the upgrade (after buying an economy seat) on flights of 4 hours or more.  I'm small (5"2" and 90 lbs) so I really don't need the extra room, but want to be as far from screaming kids as possible, since families rarely buy the upgrades.  For example, it was only $114 more for an economy plus seat on United from Washington to Paris.  Since I got the ticket with frequent flier miles, I can afford to "splurge".
Mar 6, 2014 9:01AM
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I flew only once on Southwest Airlines and it was enough to last me a lifetime
Mar 5, 2014 8:05PM
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Someone.... just want to point out that Bush did not do NAFTA.... that was Clinton that pushed it through
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