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Premium-Economy Pivot? Airlines Adjust Seat Size, Hope For Travel Rebound

Airlines are eyeing premium economy seating options to woo money-conscious business class travelers, and possibly weary economy passengers, back to air travel.

Photo of a woman wearing a face mask on a plane

Changing travel patterns have led to airlines offering new products and reconfiguring cabins

René Armas Maes

-Analysis-

SANTIAGO — Back in May, I wrote that full-service airlines should start analyzing the costs, benefits, and impact of the demand of business travel, and see whether they would profit from reducing seats in executive class cabins, and from developing products like the premium economy class, which lies between business and economy in terms of comfort and price. They should start doing this in the last quarter of 2021 — I wrote back in May — especially considering that the demand for business class seats and its revenues were unlikely to recover in the following 12 months. And that is what is happening now.

Changes in business travel patterns are clearly evident today because the way people work has changed for good. Thus airlines must be flexible and adapt, especially when a significant change in passenger demand is expected. By way of reference, full-service airlines (i.e. airlines that offer full services and higher prices, unlike low-cost airlines) generate 70% of their revenues and 50% of their traffic from the business travel sector. Indeed business travelers are the lucrative sector that directly assures profitability for these airlines.

Airlines adjusting to changing travel patterns

Today, changing travel patterns have already led to airlines offering new products and reconfiguring cabins.

In Europe, Lufthansa Airlines has premium economy cabins in more than 100 long-haul planes and plans to expand this product in 2022. Colleagues in the sector have told me that at least two other European airlines will announce cabin reconfigurations to boost premium economy products in the first quarter of 2022.

In the Middle East, Emirates offered travelers a limited premium economy cabin in 2021, preferring to first test the market before diluting or ditching its business and executive class products. The airline is currently carrying out an important reconfiguration program for 100 wide-body planes. Emirates wants to install premium economy cabins in 53 of its Boeing 777 planes and 52 A380 planes over 18 months. Qatar Airways and Etihad will very likely follow suit.

Premium economy cabins are nothing new, and began years before the coronavirus pandemic. But the pandemic-induced crisis in passenger demand has given them a boost.

In Latin America, three full-service airlines currently under bankruptcy proceedings may also have to change their business strategies in medium and long-haul flights, including through greater use of premium economy at the expense of business or first-class products. I do wonder why the strategy was not considered before as part of their restructuring processes, especially noting the changes in business travel patterns.

In the case of LATAM and Aeroméxico, their "plus" sections in the economy cabin are not new products. The airlines may charge more for those seats, but as a product, they generate fewer revenues than a novel premium economy option.

Photo of Emirates staff inside one of the fleet's Premium Economy Class

Emirates offers travelers access to Premium Economy Class

Emirates

Maximizing revenues through premium economy

On average, premium economy seats are 10% wider than economy seats but generate more revenue. So, wouldn't it be convenient to add more seats to a class that could generate higher returns? This type of reconfiguration would also be less costly than introducing new business class cabins, which explains why airlines are warming to the concept.

Premium economy can help airlines maximize revenues both during and beyond the pandemic, and help widen profit margins as part of a varied strategy that includes passenger segmentation, profiling and loyalty. The concept works in both directions. Business travelers may well want to "downgrade" to a less costly service, which remains more comfortable than economy class. Also, many economy travelers may well be ready to pay a little more for better services offered in premium economy.

Premium economy's benefits for airlines can include:

1. Reducing costs per available seat/kilometer or airline capacity;

2. Balancing the changes in travel patterns, purchasing habits and reduced corporate travel budgets;

3. Earning more from economy class travelers who want to improve their travel experience with an "intermediate" product;

4. Providing business travelers with a cheaper option that still provides "premium" services like separate check-in, Wifi, superior catering;

5. Maximizing revenues per passenger.

Finally, how many seats should the premium economy cabin hold? This depends on the route, departure times and the competition. But based on a global benchmark, a standard figure is that between 8% and 11% of the plane's seats could be premium economy.

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Ideas

Joshimath, The Sinking Indian City Has Also Become A Hotbed Of Government Censorship

The Indian authorities' decision to hide factual reports on the land subsidence in Joshimath only furthers a sense of paranoia.

Photo of people standing next to a cracked road in Joshimath, India

Cracked road in Joshimath

@IndianCongressO via Twitter
Rohan Banerjee*

MUMBAI — Midway through the movie Don’t Look Up (2021), the outspoken PhD candidate Kate Dibiasky (Jennifer Lawrence) is bundled into a car, a bag over her head. The White House, we are told, wants her “off the grid”. She is taken to a warehouse – the sort of place where CIA and FBI agents seem to spend an inordinate amount of time in Hollywood movies – and charged with violating national security secrets.

The Hobson’s choice offered to her is to either face prosecution or suspend “all public media appearances and incendiary language relating to Comet Dibiasky”, an interstellar object on a collision course with earth. Exasperated, she acquiesces to the gag order.

Don’t Look Upis a satirical take on the collective apathy towards climate change; only, the slow burn of fossil fuel is replaced by the more imminent threat of a comet crashing into our planet. As a couple of scientists try to warn humanity about its potential extinction, they discover a media, an administration, and indeed, a society that is not just unwilling to face the truth but would even deny it.

This premise and the caricatured characters border on the farcical, with plot devices designed to produce absurd scenarios that would be inconceivable in the real world we inhabit. After all, would any government dealing with a natural disaster, issue an edict prohibiting researchers and scientists from talking about the event? Surely not. Right?

On January 11, the National Remote Sensing Centre (NRSC), one of the centers of the Indian Space Research Organisation (ISRO), issued a preliminary report on the land subsidence issue occurring in Joshimath, the mountainside city in the Himalayas.

The word ‘subsidence’ entered the public lexicon at the turn of the year as disturbing images of cracked roads and tilted buildings began to emanate from Joshimath.

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