Why The New Business Class Is So Popular With Airlines

Those of us who were old enough to experience the golden age of travel – or even pre September 11, 2001 – may recall a time when business class seats were a little different from those seen today. They were cozy, sure. More often than not, a business class ticket meant large lazy-boy style seats that seldom reclined flat. They came bundled with friendly, personalized service, a good amount of legroom, extra luggage, and priority boarding. If you were really lucky, you might even have a seatback screen with a range of five or six movie options.
Think I’m being dramatic? Take a look at some of the business class offerings of yesteryear. Remember Delta’s BusinessElite seats, British Airways Club World ‘Cradle’ Seats, KLM’s World Business Class or Air New Zealand’s Super B Service? A passenger used to the luxurious seats on offer in today’s business class cabins would have found the recliner seats of yore rather bemusing – and ultimately, not up to scratch.

From Lush to Lux – the Rise of Business Class…

While Gulf carriers have yet to let go of the tacky, false walnut paneling that permeates their premium cabins (Emirates, I’m looking at you), business class seats have experienced vast improvements in the last 20 years. During the mid-1990s, the only way to experience a lie-flat bed was to fly First Class, with Air France and British Airways being some of the first airlines to offer fully flat seats in their top cabins. While the drive for more luxurious cabins may have seen the traditional heavy hitters like Cathay Pacific and Singapore Airlines lead the pack, the rise of Middle Eastern carriers in the early 2000s certainly helped to stimulate industry-wide changes to premium offerings. Now, lie-flat beds are a staple amongst many of the leading business class cabins of the world and offer a level of lux that would have been hard to imagine in the mid-1990s lazy-boy land.

… and the Fall of First

However, even the ever-opulent Middle Eastern carriers are seeing a rise in austerity measures. Faced with trade embargoes, plummeting profits and increased fuel prices, profitability – rather than premium offerings – are taking precedent. In the never-ending search to increase margins and maximize revenue, airlines are focusing on filling seats – and often, it’s not those situated at the pointy end of the plane. Several airlines have dropped first class already – including Korean Air – and others are offering a first-class cabin on selected routes only. In 2018, even Singapore Airlines announced it would be decreasing the number of first class suites on offer on its A380s, despite it being rated one of the most well-regarded first-class products in the sky.

The facts are these – demand for first class is decreasing, executives are flying a business class that, in some cases, surpasses the first class of yesteryear, and a rising number of middle-class travelers are seeking a “premium” economy experience. In fact, If you ignore the technological changes and squint just a little, the premium economy seats of today could nearly be confused for the business class seats of the 90s. The ‘average’ seat pitch and width of a premium economy seat – 19’’ and 38’’ or 39’’ – is almost what you would have once experienced in a fairly standard business class seat. While the best premium economy seats have a few extra bells and whistles thrown in, the fact of the matter is that flyers, generally, tend to focus largely on one issue – how comfortable their seat is.

Where Does Premium Economy Fit into the Picture?

The concept of premium economy is fairly new. It was first introduced in 1992 on Taiwan’s EVA Air, a concept followed quickly by Virgin Atlantic. Offering hot towels, premium service and private video-on-demand entertainment screens, Virgin’s introduction of this new cabin was a response to businesses downgrading its passengers from business class to economy, attempting to make travel more cost-effective for business people. Yet, in just over 25 years, this once-radical concept has cemented its place in the airline industry.

Research by Carlson Wagonlit Travel in 2018 found that, on flights from Singapore, the number of premium economy seats booked for corporate travel increased at the average rate of 157% year-on-year from January 1, 2015, to December 31, 2017. Interestingly, these bookings were not as a result of decreased business class bookings, but instead, upward movement from economy class. As premium passengers downgrade from first class to business, and many economy passengers are upgrading, it only makes sense to take advantage of this growing market segment. However, Carlson Wagonlit Travel also identified that, in 2018, less than 4% of seats in the sky were in a premium economy cabin. This represents a massive growth opportunity for airlines, particularly as airline class wars shift to the cheaper cabins of the sky.

What’s That Premium Cabin Really Worth?

If you’ve ever spent much time flying, you’ll be well aware that, historically, many of those plush looking seats in business or first are filled with points flyers, frequent airline guests who can use their loyalty points to upgrade to a premium cabin. In 2018, there were only around 20 routes worldwide with first-class seats that attracted more than 10 full-fare paying customers daily, according to Samuel Engel of ICF International Inc. Despite charging a pretty penny to the full-fare paying business traveler, the business and first-class cabin aren’t always the most lucrative earners for the airline. While it’s getting much harder to get a ‘free’ upgrade, even as a repeat consumer (in 2017, Delta stated that it now makes revenue from around 50% of its premium seats, previously only 15%, due to a changed upgrade policy), airlines are looking for other ways to grow revenue.

At the other end of the spectrum, the fight for the economy passenger has only grown more fierce. Within Europe alone, Anna Aero calculated that low-cost carrier seats have increased from 224 million seats in 2009 to over 500 million in 2018. An attempt to woo economy passengers back to full-service carriers, coupled with informed passengers seeking an option in between sardine style economy and costly business class, has created a new market for airlines.

Who Flies Premium Economy?

The premium economy passenger can take a variety of guises. It could be the well-off 50-somethings going on one of their semi-annual holidays, not wanting to blow their entire travel budget on business class – but wanting to ensure they arrive refreshed. It may be the executive that doesn’t think that the extra cost to fly business is justified, believing that premium economy offers the best value for money. I know of several 30-somethings that choose to pay extra to fly premium economy due to a fear of flying, claiming the extra comfort an anxious flyer can achieve with just a little more space. Some premium economy passengers are really tall, and flying is so uncomfortable for them that they’ll pay for those precious few inches of legroom.

One of the most perplexing characteristics of premium economy is that it doesn’t seem to follow an established standard. Premium economy doesn’t promise to really be anything in particular to any specific group, and for that reason, it has a wide appeal. It’s relatively easy to manage customer expectations when you are promising something a bit better than economy, but being pretty vague about how that is delivered.

Premium Economy = Premium Profitability?

Airlines have the opportunity to make a fair bit of coin off premium economy passengers, too. While there is a subset of savvy passengers that know that the cost for flying premium economy can only be an additional 35% on the economy fare when booked close to departure, most passengers generally pay two or three times the economy fare. From an airlines perspective, this creates a reasonable revenue buffer when compared to the fairly thin profit margins of economy class seats.

Lacking the silver service of the business cabin, and generally only taking up slightly more room than an average economy seat, premium economy just makes sense. As described by Seth Kaplan of Airline Weekly – “… anytime you can get paid double for something that doesn’t cost you double to produce, that’s a pretty good place to be…”. Let’s be honest – your carrier is not paying double the cost for the food you eat in premium economy, or the smidgen of extra service you receive, and you certainly aren’t taking up double the space.

All Seats Are Not Created Equally

A caution to those flying premium economy, though – that aforementioned lack of a specific standard means that a whole lot of different products can masquerade as being “premium economy”. While we’ve discussed premium economy seats harking back to the business class of yesterday, that’s where the comparison with business class typically ends. Those seeking a luxurious service are sometimes disappointed – and, as on any flight, you can always end up with a broken seat or in-flight-entertainment fail. Remember, there are also disappointing seats in nearly every airplane cabin – as anyone who has sat in the middle seat of the Emirates 777 business class cabin on a 14-hour flight can attest to.

At a basic level, premium economy may offer a wider seat, better legroom, and perhaps a better meal experience. Some airlines offer additional luggage, priority boarding, or inflight amenities such as eyeshades and toothbrushes. It’s entirely at the whim of the individual airline – and can vary greatly. At the other end of the scale, you could end up with a premium economy seat that essentially replicates a fairly basic economy seat, with no frequent flyer points, minimum legroom, and the same culinary offerings as your bog-standard economy seat.

The moral of the story? Buyer beware. Make sure to do your research. Given that airlines tend to make the most bang for their buck on long and ultra-long haul premium economy seats, if you’ve got the luxury of shopping around for different carriers, stick with those that have a reputation for a strong premium economy offering. Most of all, don’t forget – the airline is there to make money from you. Silver spoons will not be forthcoming, but those few extra inches of legroom might just be enough to create a loyal customer out of you yet.

 

[Image: YouTube/Air New Zealand]