Is Premium Economy impacting Business Class sales? AA overselling PE.
 

I have upcoming international flight - and PE is 100% full (all seats take and was W0 for a while). No seats have opened up, but AA keeps changing W inventory to W2 now to W6. J was J5, then with a cancellation it went to J6 and now with another cancellations up to J7 (put only 7 not >7). Watching J fluctuate as a seats becomes occupied or opens up. But no cancellations in W (which is full) but now selling W6.

Obviously, AA is hedging - by offering both J and W - so if they sell another W - then they will drop a J inventory to compensate.

I guess this is a good strategy for AA, but it does appear AA is holding off on releasing C upgrades as a result.

By AA now offering PE do you think some business travelers are now buying W instead of J?

On certain flights and certain routes, of course! For example, from US to London - overnight flight, I want a business class "bed" if I can get one. Returning from London, daytime flight, PE is just fine.

Business travellers travel on company expense would choose Business whenever possible.

Business travellers travel on own dime would rather choose Business whenever possible, only when the fares are drastically different one may consider PE.

PE is primarily designed for travellers who wants better facilities yet not able or not willing to pay the price of Business. There are two types of PE travellers. The first is broadly leisure group. Travellers usually purchase lowest PE prices. The second is last minute business people, they often purchase W fares, which can be more expensive than I class in business.

From the floor space perspective, PE class is the most profitable cabin on the plane.

A good strategy of revenue management can make more money on 21 PE seats than 20 J seats. I am not joking here. 20 J seats on B788 may only attract 9 I fares, 3 D fares and then upgrades. But 21 PE can produce more revenue than the J section if the inventory was controlled and managed nicely.

If any past experience and numbers are true, PE would not erode Business class sales. There is no reason for people used to business class and first class amenities to downgrade rather than affordability. And if you are not willing to pay Business/First at the first place, maybe you are not liked by AA any way. They are just happy to take your money for you to settle in PE and sell the Business/First to other passengers who would like to pay the silly prices. And effectively, AA is double happy as you chose PE which is the most profitable cabin for them.

I can see more PE seats per plane for important markets next decade.

Interesting. In my case - US to LHR, I purchased PE, and am waitlisted for upgrade. On the return, C was available at purchase time, so I was able to confirm J for the return. I still purchased PE on the return since it wasn't that much more than Y and you get 50% more EQM on a PE fares - since you earn based on ticketed class of service.

But what I am seeing is AA opened up W6 when sold out. So that means that there are likely at least 6 W flyers on the upgrade wait list - me included with 7 J seats open (seat map has 12 open - but likely 5 don't have seat assignments, since it drops to J6 when a seat opens and goes back to J7 when a seat is cancelled.

But I am surprised AA doesn't keep W at W0 to force people to buy J, who want something other than Y.

On some aircraft, namely the 45J 772 and 788, J was reduced as PE was installed. Could mean AA expected PE sales to reduce J sales. People who previously wanted something more than Y had to purchase J when there was no PE; now with PE available some of those people may opt to purchase PE.

It is absolutely smart strategy to oversell PE if J is not projected to fill up. It is another way of multi-pricing----selling some J at PE prices, without openly discounting the J seats.

You cannot "force" people to pay for J. That would be like saying "I am surprised AA doesn't sell all Y seats for full fare to force people to pay it if they want something other than staying home". It is well established that multi-pricing (also called differential pricing) works to increase revenue.

Your subject line suggests that PE is "impacting" J sales but you have zero evidence for that. It is quite common for J to not sell out, PE or not---even when you see that the J cabin is full, that is not all people who have paid for J. If they are filling J with PE-paying passengers, that is more profitable than upgrading economy passengers.

This isn't particularly significant, because ExpertFlyer never shows more than 7 seats in a fare bucket for AA. That is, 7 really means >=7.

How is this concept different than the long-standing practice of overselling Y? And it is better to oversell W and upgrade people into J, than it is to oversell J and downgrade passengers.

Yes I know J7 means 7 or more. But what I see - is say J6, with a certain number of J seats assigned. Then one assigned J seat goes away (meaning cancelled) then J goes back to J7. Then say 2 J seats now taken then it drops to J5. So I am pretty certain in this case for my flight (a 77W) that J7 is 7 for sell.

When AA is overselling PE - say W6, P is P0. So AA will take the higher PE fare W and not the lower PE fare P.

I think it's inevitable that the existence of W will ultimately erode J sales somewhat. It will take a while for corporate travel policies to catch up, and I suspect that there will be quite a bit of grandfathering, but I don't see how a travel manager worth their salary could possibly ignore the savings opportunity represented by allowing only W for westbound transatlantic flights, for example.

OTOH, W also provides an opportunity for incremental revenue from passengers (or their employers) who would never have paid for J. (I work in IT, where this is very much the norm.) Airlines that introduce W have to balance these two trends. I suspect that this balancing act is one of the primary factors in the small size of W cabins.

For myself personally PE has increased my leisure international travel. I can purchase PE and know that I will be acceptably comfortable for my international fight and put in a miles + co-pay or SWU request. If I don't get upgraded I don't mind. Previously I would purchase economy ONLY if I could instantly upgrade or if loads were very very low in J. I find it simply miserable to fly economy for long flights. At times I do purchase a J ticket but only if there is a deeply discounted I fare available.

AA knows far more about the behaviour of passengers that we do.

They know who many no shows will likely happen and how many corporate bookings will likely shift to other flights in the days before a flight.

And never look at a seat map. it never reflects sales. many people don't select a seat until OLCI or physical check-in even if it is free of charge.

And if you get an upgrade then well done but if you sit in PE remember it's what you paid for.

AA mostly replaced the main section of MCE withe PE. MCE is now mostly exit rows and bulk heads. This is a negative for me (compared to UA). UA enforces E+ and sells it. Many pay the upgrade fee ($147 for a domestic flight on UA). PE is selling out. Although sometimes it is priced less than cheapest Economy.

Who?
Y RT to Europe is $800 - $1300 (sometimes crazy $500 RT to LHR)
J RT to Europe $5000 +

And that has been the price difference for a long time, even before PE.
People that wanted more than Y, simply had to be stuck in Y. Most common folks (like me) ain't got it like that (splurge $5000+ on a business seat).