What’s the Deal with Premium Economy? (Ask Cranky)

Happy New Year, everyone. I’ve been looking through my old drafts, and I realized there were a couple of posts that never got published last year, and here’s one of them. It’s an Ask Cranky question . . .

I knew from reading your blog that premium economy was something that lots of airlines had been experimenting with (BA’s Open Skies, etc.), achieving extremely varied levels of success. However, I would love to know more about the rationale for beefing up premium economy on multi-class aircraft. Are airlines making money on customers who choose premium economy? Are [Business] and [First Class] passengers expressing any concern that some of their traditional “territory” (lounges, preboarding, etc.) might be devalued by expanding its availability to non-[Business/First] customers? What is the outlook for premium products, say, over the course of the next ten years?
-Zach in Chicago

I would say the outlook for the expansion of premium economy is good over the next decade. This is a direct result of the gaping hole that has opened between coach and the premium cabins that are out there today.

Think aboutAsk Cranky how it used to be. There was coach and there was first class. As first class started to gain greater distance from coach in price and comfort, airlines began rolling out business class to fill the gap. The problem is that first and business class have continued to get better and more expensive while coach has, well, stayed coach.

These days, the flat beds you find in business class are far superior to anything that used to exist in first class. But coach seats are still just coach seats. If anything, they’ve lost a little legroom. Some airlines decided that first class was a waste of time and simply went with a two-cabin approach of business and coach. But these are all just names. The business class on, say, Virgin Atlantic, would have been worthy of the first class moniker just a few years ago.

So you end up with a funny situation where you can buy a coach roundtrip from the US to Europe for $600 but if you want any more comfort, you’re going to be paying $4,000 to $10,000 for business class. Further, as companies cut back their travel budgets, business class becomes a no-no. So what to do?

Well, the airlines started rolling out premium economy. This has two benefits. One, you can fly it for $2,000 to $4,000 roundtrip, so it provides an in-between price point. Two, it’s a coach seat so some people can still take advantage of it under their corporate contracts.

I don’t count United’s Economy Plus as a true Premium Economy cabin. That’s really just coach with a little more legroom. But the likes of British Airways, Virgin Atlantic, Air New Zealand, Japan Air Lines, EVA Air and more recently, Air France and ANA, have put in a better seat, somewhat upgraded service, and branded it under this new name.

The reality, I think, is that you can look at an airline like Virgin Atlantic and it seems the same as things used to be. Sure, they may call it coach, premium economy, and “upper class” but it’s really just coach, business, and first from the old days.

I would expect to see more airlines do this, especially as travel budgets go down for premium class travel. They may have too many seats taking up too much space in business, so the premium economy cabin may grow.

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24 Responses to What’s the Deal with Premium Economy? (Ask Cranky)

  1. David SFeastbay says:

    Premium economy is just a place to put the person who had to buy that last minute full fare coach ticket. It makes them feel better about having to pay so much money for a walk up fare, by giving them something different then the person they used to sit next to that purchase the $39 ticket.

    If you look at the ‘finer’ airlines out there that are making Business and First almost look a like (i.e. flat beds) you have to wonder when they will get to the point of saying why do we have both. In time what is now called a premium economy will be the new business class. As the saying goes, ‘What goes around comes around’, and it will be that way with airline cabins/seats.

    Off topic: Was reading the current Airways magazine and who’s name do I see in the story I’m reading but Brett Snyder and his ‘Cranky Flyer’ blog. Thumbs up to your 14 lines of magazine fame. :-)

  2. Zach says:

    Thanks for digging this up, CF! That was an interesting explanation that makes a lot of sense. Instead of being something completely new, it’s simply a re-adjustment to meet the original goals of three-class aircraft (goals that were no longer being met due to business class evolving into “first class light”). Intriguing stuff for us airline dorks.

    I would agree with you on United Economy Plus not being a premium economy product in the aforementioned model (as opposed to something like that offered by British Airways, where you have a completely upgraded seat with electronic controls, foot rests, improved recline, and slightly more attentive service). I recently upgraded to E+ on both an ORD-LAS flight (for $45) and an IAD-ZRH segment (for $100). The former, in my opinion, was worth it, but $45 is about all I’d be willing to shell out for the extra legroom on a flight of any length, and even that amount is pushing the envelope. My return ZRH-IAD flight in economy-minus was probably more pleasant than my E+ flight, if only because I was more efficient in organizing my seat area/carry ons, and so I felt more comfortable.

    Thanks again for answering my question.

  3. Dan says:

    I’m 6’1″ and too many pounds to admit to on this blog. In 2009, I managed to take 4 segments of any reasonable length — IAD-LHR (r/t, BA) and IAD-LAS (r/t, UA).

    The eastbound flight in on BA wasn’t bad, but OTOH, I slept for a bunch of it. However, on the return, it was downright uncomfortable after about 5 hours.

    On the IAD-LAS flight, I had a regular economy seat. We had a diversion without deplaning, which put our total time on the plane at about 8 hours. The last three or so hours had me begging for a bigger seat.

    On the way home, we were assigned E+ seats. Granted, east bound flights are shorter than the westbound flights, but all in all, I found it to be rather comfortable.

    Zach, UA will sell you E+ access on annual basis as well — it costs $350 (give or take) and allows you one companion. You can recoup the costs in one international round trip. My wife and I are planning a trip to Thailand next year, and if all else fails, we’re going to take UA and buy the E+ access.

  4. Daren S says:

    Another angle is the uplift in terms of revenue when using FF points. On BA if you want to upgrade you can only do it from the cabin immediately below, so if you want to use BA miles to upgrade to Club World, you have to buy a Traveller Plus ticket and upgrade from there whereas for airlines that don’t have a premium economy cabin you can upgrade from Economy. Of course, normally these only apply to certain fares, but I would imagine it is still usually cheaper in those instances than if you buy a premium economy ticket.

    I also think that there will be further enhancements in premium economy cabins and we may get to the stage where it will be almost the same as business cabins 20 or so years ago. Virgin’s new premium economy is now better than BA’s and I expect BA will have to refresh theirs soon to keep up.

  5. A says:

    This whole thing sounds like the airlines just trying to be all things to all people in a business where simplicity has the strongest track record of success. People the world over copy Southwest and it sure ain’t for their premium product.

    In my opinion all non-LCC airlines have gone overboard in competing for the premium traffic, making it so lavish that they now have to offer something to those in-betweeners because the F class is so out of reach that only Saudi kings and Google IPO’ers can afford the fare.

    For 99.9% of my travel all I really would request for an upgrade is a little wider seat, some more legroom and a hot meal. Given the example of $600 to europe in coach I’d probably be willing to part with another $200 to $400 for something like what I want. $2000 sounds steep and $4000 sounds ridiculous.

    I’m all for going back to the two class cabin layout of the past, with reasonably priced upgrades and leave the elite flying for charters and private jets. It’s a Chevy vs. Cadillac argument and the major airlines should be thinking about revenue on passenger volume, not ticket price.

  6. Dave Hodgkinson says:

    I just paid the premium for E+ from IAH to LHR. I’ll let you know. Looking forward to better recline on the sleeper back. I’m only 5′ 10″ and legroom (or ass-room) isn’t an issue for me.

    I’m suspecting it might be a way of selecting a cabin of middle-class, middle-income, middle-brow folks and leaving the students and Joe plumbers in the back.

  7. Oliver says:

    @A — but a typical Premium Economy seat takes up probably more than $200 worth of extra space.

    @Cranky — do you see any of the US carriers with international routes get into the Premium Economy business?

    I found it interesting that AF/KLM recently introduced two different products — KLM an Economy Plus look-alike and Air France a more traditional Premium Economy product. Do they really have a different customer base requiring this differentiation, or are they just trying both, to see what works better?

  8. Oliver says:

    @Dave Hodgkinson E+ on United? That doesn’t give you extra recline.

  9. Dave Hodgkinson says:

    @Oliver no, BA.

    And no Priority Pass lounge at IAH T4. All stitched up by the 3 main groups. Still struggling to achieve silver on BA with my cheap flying practices.

  10. Zach says:

    @Dan: many thanks for the suggestion. I’m always a little afraid to shell out money in advance for something like unlimited E+, since my flying habits are fairly erratic (don’t fly for work, and although I tend to take at least 1-2 international trips per year, it’s not always on UA, since price is often the most important factor for me). Nonetheless, I prefer UA for miles purposes, so the $350 E+ deal is definitely something to consider.

  11. My coworker paid the $350 last year allowing unlimited E+ upgrades on UAL. Flying average once a month (probably more,) it was worth it.

    Another nice factor is sitting up front. Those 10 minutes saved by being in row 10 versus the 20s on a narrow body do add up. At least it seems so while waiting to deplane…

  12. CF says:

    David SFeastbay wrote:

    Off topic: Was reading the current Airways magazine and who’s name do I see in the story I’m reading but Brett Snyder and his ‘Cranky Flyer’ blog. Thumbs up to your 14 lines of magazine fame. :-)

    Oh yeah, I hadn’t gotten that far yet. (Still on the Key West article) That was done by Dan Webb, who writes Things in the Sky.

    Oliver wrote:

    @Cranky — do you see any of the US carriers with international routes get into the Premium Economy business?

    I’m actually kind of surprised that nobody has really tried it yet. You would think that as these joint ventures get tighter and tighter, they’ll be able to share enough revenue info to determine whether it’s worthwhile or not.

    Oliver wrote:

    Do they really have a different customer base requiring this differentiation, or are they just trying both, to see what works better?

    Beats me – it’s probably not even that coordinated. I bet the French wanted it one way and the Dutch the other so they just did it.

    James Van Dellen wrote:

    My coworker paid the $350 last year allowing unlimited E+ upgrades on UAL. Flying average once a month (probably more,) it was worth it.

    If you’re flying at least once a month, then you should be able to qualify for elite status and then you don’t need to pay $350. Then it’s included.

  13. Robin Johnson says:

    Premium Economy seating on “real” airlines is generally wider than regular Economy, or what USAns call Coach, being 6-across on 767, 8-across on 747 or 777, 7-across on 330/340 or 380 upper deck, as well as giving more fore-and-aft space.
    Virgin/Pacific Blue in Australia and nearby which has bo Business of First is now selling the front few rows on 737s as 4-abreast Premium Economy, ie with centre seats unsold.

  14. Zach says:

    @ Robin: To be fair, even standard economy on “real” airlines is wider and/or has better seat pitch than that on most US airlines :-)

  15. A says:

    Oliver wrote:

    @A — but a typical Premium Economy seat takes up probably more than $200 worth of extra space.

    Think of it like this with the $600 ticket example. Economy class layout of 3-3-3 on a B777 or equivalent. Trade it out for a 2-2-2 layout with wider seats. If you keep the same seat pitch you can essentially break even as an airline by charging $300 extra for those seats. I said I’d be willing to part with $200 – $400 extra for that wider seat and a hot meal. At the $400 level the airline is cranking out more profit than if they had sold an extra seat in that space.

    My complaint about the excessive nature of the premium cabin these days is that at least for American based airlines I find that very few people actually pay for that perk. Most people I know that fly up front do so on elite status and reward miles. That especially goes for those flying overseas. Couple trips to Japan and you’ve got enough miles to keep you up front for “free” the entire year.

    I think the airlines are missing a huge revenue opportunity by basically giving away something for so-called airline loyalty. Even dumber is this competition between carriers to give away the most in F class, i.e. lie flats, etc. Now I’m no insider so I could be grossly wrong, but as security gets to be a bigger hassle and more of the super wealthy go to private jets I think the airlines need to take a serious look at who their core customers are and offer amenities & pricing to match. Even a 380 isn’t an ocean liner and can’t reasonably offer half a dozen classes on one aircraft. F, business, economy +, economy….gee, where does it end?

  16. Kim says:

    “Some airlines decided that first class was a waste of time and simply went with a two-cabin approach of business and coach.”

    And others decided to completely ruin their revenue streams and go first and coach. Therefore those business travelers who only fly business land up flying coach because of what the rows up-front are called!

  17. Continental still has first class and offers a meal on domestic flights. The coach seats seem roomier when compared to other airlines. It’s up to the traveler on how much they want to spend on how comfortable they want to be when they travel.

  18. Ron says:

    Now here’s the really confusing bit: domestic flights in the U.S. typically have a modest premium cabin (no flat beds) because of the relatively short flights, but the airlines call it “first”. Add to this the fact that Continental, Delta/Northwest and US Airways have long ago gotten rid of their international first class cabins, and you find that on these airlines, “business” is a much better product than “first”. This is fine as long as “first” is restricted to domestic and “business” to international, but when these airlines operate international aircraft on domestic routes this gets really confusing — for example, Delta markets the internationally configured front cabins on its LAX–JFK route as “business”, expecting people to understand that it’s better than the “first” on the rest of the system. For United and American, who operate 3-class aircraft on some domestic routes, the front cabin on 2-class aircraft (“first”) gets similar codes and pricing as the top cabin on 3-class aircraft, even though the product is greatly inferior to even the middle cabin.

    Now why don’t they clean up this mess by calling the domestic premium cabin “business”?

  19. Oliver says:

    @A — but why would airlines want to sell their premium economy seats for $600 +$200? Remember, not everyone in coach pays the same fare, so they might as well price the premium economy cabin slightly above the higher or highest regular economy fares. After all, wouldn’t it suck to pay $2000 for a coach seat to then have someone else pay $800 – $1000 for a premium coach seat?

    Also, regarding “Couple trips to Japan and you’ve got enough miles to keep you up front for “free” the entire year” — please show me how you accomplish that. I fly about 100k miles a year on United that that still doesn’t give me enough miles and certificates to always flight up front “for free”. SFO-NRT-SFO is 10248 miles. Even with my elite bonus of 100% I only earn 20500 miles (RDM) on such a round trip, which isn’t even enough to upgrade one leg of that flight (30k miles upgrade cost). And barely enough for a one-way domestic upgrade, which by the way will now incurr co-pays (e.g., $500 to Hawaii each way).

    And regarding “but as security gets to be a bigger hassle and more of the super wealthy go to private jets” — have you looked at the cost of owning/leasing/operating private jets?

  20. Oliver says:

    @A I should add that the 10248 miles also give me 4 e500s (which for me mostly expire/turn into miles for me) and potentially 2 CRs1 (which are useful).

  21. David SFeastbay says:

    Kim wrote:

    “Some airlines decided that first class was a waste of time and simply went with a two-cabin approach of business and coach.”
    And others decided to completely ruin their revenue streams and go first and coach. Therefore those business travelers who only fly business land up flying coach because of what the rows up-front are called!

    Very true as a lot of company travel polices don’t permit ‘first’ class but do permit business class. So a lot of travelers must fly in coach paying full coach instead of up front if the airline calls it ‘first’. But since a number of airlines in the U.S. have the -up type fares, those passengers can still buy the (example) Y or B type fare and be seated in the first class cabin.

    So airlines in the U.S. may still call it ‘First’ class to please those travelers born with a silver spoon in their mouth, but still provided a way for the road warrior to get a little bang for their buck and be up front for a coach price. But since all airlines are hurting, does it really matter what it’s called? Maybe so since the Europeans all go with Business/Coach two cabin wording within Europe.

  22. Clark says:

    I’ve been flying EVA’s Evergreen Deluxe for years and it’s a fantastic value — especially if you can get those seats near the front on the old 747-400. YOu really feel the difference when you are downgraded to economy when flying Air Canada to the east coast.

  23. Robin Johnson says:

    Don’t let us add to the confusion by bringing in European ideas of Business Class.
    Within Europe. most major – what I tend to refer to as “real” – airlines use much the same seating for Business as Economy, with the centre seats blocked, but the seat pitch and angle of recline no better than regular economy seating. Aboard Lufthansa A300s, now thankfully out of service, the so-called Business-class seats retained the 8-abreast configuration of regular Economy.

    This European arrangement would be better called Premium Economy, as it is by Virgin Blue in Australia. On longer flights, and larger aircraft where BA and some others (including EVA) have four different classes, the distinctions are clearer.

  24. Robin Johnson says:

    I just lookedf up EVA in Seatguru.com and it turns out they have three intercontinental classes, including Elite, their Premium Economy – 8-abreadt on 747 and 777.

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