After the crisis caused by the coronavirus in the air transport sector, airlines are on the road to recovery. Prior to the pandemic, companies focused on incorporating — especially on long-haul flights — a new middle class: the premium tourist (name varies by company). It offers more comfort and services than Economy Class at a lower additional cost than Business Class. Its advantages attract more and more passengers and it has become the most profitable point of sale for airlines. A safe bet that gets more and more space, to the point where upmarket business class has shrunk.
The front of the aircraft is still the cornerstone and the part of the aircraft where airlines make the most profit on every flight. The pandemic has penalized tourism and almost completely eliminated business travel, which traditionally took up most of the seats in business class. However, thanks to this move, the airlines managed to make the profitability of this place even greater than when the aircraft was divided only into tourist and business class, and many recreational trips were made at a slightly higher price. Being able to comfortably fly for several hours and being away from crowded places on the plane is a great incentive.
This shift has mostly started in North America, although European companies have been using it for more than a decade. Air France was one of the first to introduce this model in Europe in 2009. It currently offers 6 to 11 percent. places of this type in your fleet. “Most of our premium economy customers are over 45 years old, and often years old. They travel for pleasure and indulge in great comfort,” the company’s representatives explain.
In the case of Iberia, these places were activated in January 2017, and the results were higher than expected before the pandemic hit. The results were so good that new aircraft ordered by the company were designed with this cockpit in mind. In addition, on aircraft that were already in use, more space was provided for these seats by reducing the seat compared to business class. “As part of the Airbus A330 upgrade, we removed seven business class seats to install new premium economy class seats,” sources at the IAG group airline said. Two aspects are the key to its success: on the one hand, what it offers to travelers. On the other hand, because of the investment in space and the necessary resources. In both respects there are significant advantages over what already existed. Travelers in this class have priority access, wider seats, more seating and a larger menu. This, of course, comes with additional costs. On average, a ticket in premium economy class costs 250-500 euros more than in tourist class, but 1000-1500 euros cheaper than in business class.
According to Bloomberg, for example, at Deutsche Lufthansa AG this class generates 33% more revenue per square meter than economy class and 6% more than business class. In addition, it is 40% more profitable than business class, as it is much cheaper to install. German Airlines is already exploring the possibility of eliminating more business class seats in order for this new class to flourish.
Passenger transfer
One of the concerns of the airlines was that business class passengers would move to this new class. This means that the number of passengers on the most expensive part of the aircraft will decrease, and the revenue per flight will decrease. The reality turned out to be quite the opposite: most of the passengers are tourist class.
This phenomenon is explained by the fact that many passengers flying for tourism purposes prefer to pay a little more in exchange for more comfort. Though business travel is also important in this class and has so far dampened its recovery. As Bloomberg has noted, this trend will continue and is likely to improve: according to Counterpoint Market Intelligence, the pace of growth will accelerate as more airlines include these seats on long-haul flights.
The penetration of this new class cannot be stopped. This has already reached low-cost airlines, at least with long-haul flights.
During the most difficult period of the pandemic, when many travel was limited, and business and leisure travel was practically non-existent, all business was affected and not a single class of places was saved from this disaster. Now, with the booming economy, the most expensive airlines, eager for business travel, are lagging behind the most. This is because much of the corporate market has yet to recover to the same level as other forms of travel. And corporate tourism is an important component of premium tourism and business class.