The announcements seem to be coming fast and furious. Coming out of the pandemic, people have shown a rapidly-increasing willigness to pay up for more comfort and a better experience on airplanes. This is nothing new in the world of long-haul flying, but on shorter hauls, it is quickly creating the “haves” and the “have-nots.” Now it’s the latter group that is trying to play catch-up.
This is the first part of a two-part series to look at this trend in greater detail. Today, Iʻll look at the long-haul fleet. Get ready for the more dynamic short-haul opportunity soon.
We’ve seen this shift to premium on the long-haul fleet over a lengthy period of time. Think about the introduction of premium economy, the densifying of regular coach, the growth in extra legroom seats, and the arms race on improving and expanding business class options. (“Mine has a door!” “In mine, you’ll never have to see another person!” “Mine has the letter Q in it!”)
Historically, we’ve seen airlines fall all over the map with their premium strategies. Back in the 1980s, airlines like PEOPLExpress jammed in 446 coach seats into their 747s and had a mere 24 in First Class. Pan Am, on the other hand, put only 347 coach seats onboard alongside 21 First Class and 44 Clipper (Business) Class. (At least, those were configurations at one point; I’m sure it changed multiple times.)
Over time, First Class was nearly pushed out of existence, being replaced by an ever-growing Business Class cabin. These Business cabins introduced flat beds in the last twenty years, growing their physical footprint and taking over more of the cabin real estate. Then Premium Economy came to replace Business Class. It was just a shifting of naming conventions, but the one trend was that these premium cabins kept growing.
The advent of the ability to charge for seat assignments created a new opportunity with extra legroom in coach. I’ll talk more about that tomorrow in the short-haul discussion, but once airlines could charge for more legroom in the same cabin, it gave them a whole new outlook on exit rows and beyond.
What does this look like today? Well, here’s my best effort to look at how seating breaks down on the long-haul fleet by airline.
% of Long-Haul Fleet With Upsell Opportunity
For US carriers, I used fleet numbers from their most recent 10-Ks. For the others I just looked at more recent sources. In some cases, I had to assume a single configuration when not all aircraft had been converted to a new one yet, but this shows the basic lay of the land.
It’s not a surprise to see British Airways at the front of this list. London is generally one of the most premium markets in the world, and the seat count reflects that. More than 42 percent of seats on the airline’s long-haul airplanes can be considered an upsell opportunity from basic coach seating.
What might be more surprising is that United is just about the same as BA, but that is a bit misleading. The difference here is that United has a very large Economy Plus extra legroom section while BA has just exit rows. BA has much larger true premium cabins (1/3 of its fleet), which better reflects the London market while United is just around 1/4 of the seats if we leave out Economy Plus.
That being said, United recognizes the importance of premium in London as well. After all, it puts its lightly-loaded Boeing 767-300ER on most London flights. That airplane has a mere 1/3 of its seats in the coach cabin and more than 40 percent in Business and Premium Economy.
Those are two airlines that are doing quite well with their international networks in the current climate, and it’s a model to be emulated if your airline is in the right market. You may be a little surprised to see that American isn’t far behind. With American, however, it is again a huge Main Cabin Extra legroom section that takes up the bulk of that. Without Main Cabin Extra, American has about 22 percent of seats in premium economy or higher. If we look at the fleet, however, its 787s have been lower, 18 percent on the 787-9s. That would explain why new deliveries will have a bigger cabin up front. They undersized premium on those airplanes.
Perhaps the biggest surprise in this entire thing is that Delta has such a low percentage of premium on its long-haul fleet. This is an airline that’s been doing very well, so how is that possible? Well, first, there is a legacy problem here. The 767s have just 30 percent of seats outside regular coach while the A330-330s have 28 percent. We do have to remember that some of those 767s are flown domestically, so those have a different level of demand as well.
But when we look at Delta’s new deliveries, it has 40 percent outside coach on its A330-900neos, and the A350 original configuration is 38 percent. Its newest A350 config, however, has over 42 percent. So Delta is in the right ballpark here as it renews its fleet. Considering Delta saw coach revenues relatively flat last quarter while premium cabin surged, it probably wishes it could add premium more quickly.
JetBlue has a similar split to Delta on its A321LRs that fly across the Pond. The thing is, that’s a pretty small sample that’s barely worth including. But JetBlue does have a very big business class cabin as a percent of total seats. Then again, with only 138 total seats on that airplane, the numbers are going to skew very easily.
If you don’t watch the Middle East carriers closely, you might be surprised to see Qatar with such a low percent of non-coach seats. Qatar doesn’t have a premium economy cabin, nor does it have extra legroom outside of exit rows/bulkheads, but that’s by design. It’s important to remember that Qatar and all of the Middle East carriers carry a lot of workers in and out of the country to and from their homelands. These are not high-paying jobs, but they do need to travel back and forth. Those big coach cabins are important due to the mix of passengers in that region.
Meanwhile, the people who are willing to pay for premium will pay up for business class. At least, that’s Qatar’s belief. Emirates did just roll out its first premium economy cabin, so maybe things are changing.
The takeaway here is that every region is different, but some premium component is key to success. This is not a new trend. Remember when Ryanair CEO Michael O’Leary said that if they flew across the Pond they’d need to offer “beds and blowjobs”? The difference now is really more in the middle. Premium economy is hugely profitable and extra legroom seats take very little additional revenue to justify their worth.
As long as airlines can continue to upsell passengers, they will keep adding more options above the base level to capture that revenue. Those who have those premium opportunities will continue to do well for now, but who knows when those winds will change direction.
Soon, I’ll talk about the more complex situation in the short-haul market.
22 comments on “The Premium Boom Continues: Airlines Learn From Long-Haul Success”
Do you think it’s just the seat that’s appealing to passengers ?
I remember being offered upgraded meals for purchase on Air France when I last flew them accross the Atlantic. Were those just a trial or do you know if that’s an industry trend ?
I feel like some airlines still may offer an upgraded meal, but I don’t get the sense that did very well.
How did you allocate the United 777HDs which fly domestically in the UA numbers? Or maybe my question is how does UA split that out in their 10K? I haven’t bothered to read that in a while.
Also I assume same issue with 757s.
I put those domestic 777s into the short-haul category which isn’t shown in today’s post. This one includes only the less dense aircraft that are primarily dedicated to long-haul. As for the 757s, that’s not an issue.
All of those are configured the same in an international config now for United.
For Delta, I did try to break out the 757s since there is a small subfleet with flat beds.
The takeaway here is that every region is different, but some premium component is key to success. This is not a new trend. Remember when Ryanair CEO Michael O’Leary said that if they flew across the Pond they’d need to offer “beds and blowjobs”? The difference now is really more in the middle.
, I’ll bet Michael O’Leary has had his share of them with a comment like that.
As long as airlines can continue to upsell passengers, they will keep adding more options above the base level to capture that revenue. Those who have those premium opportunities will continue to do well for now, but who knows when those winds will change direction.
This is the key takeaway, it’s all about the upsell. Think about every time you go to your favorite fast food drive through & the person at the window asks “anything else?” rather than “is that all? That practice back in the day was far more subtle, but now is more in your face.
Or more directly,
“Would you like fries with that?”
“Would you like to supersize that?” (RIP… probably not used anymore)
“Which pastry can we get you with your super venti latte macchiato?”
Delta’s restraint in adding Premium™ capacity means that they can charge higher prices, which flow through to higher margins, since supply is limited. Meanwhile, Delta’s coach seats lead the industry (and it’s not even close!) as each one comes pre-farted-on by Ed Bastian, something smart consumers have shown they’re willing to pay extra for.
This trend will ultimately push passengers back to the ULCC’s even though it is causing them issues in the short to mid term. How many premium seats can you put on planes before you’ve taken out too much capacity and / or driven the price up too much?
For international there aren’t really too many ULCC options. How’s Norse doing?
As a semi frequent flyer who has low tier status on American and United, I’ve also come to realize that one of the most important aspects is how the airline handles IRROPS. Yes I like to upgrade to first when I can domestically, but I have found myself even willing to pay a reasonable premium to fly United economy over American because in the times when there have been IRROPS, United offers the app and an army of CSAs, so I can get my problem fixed quickly. As opposed to American which still sends you to the line of doom, where regardless of status or first class seat, you’re stuck waiting behind 132 people. Until American fixes its handling of IRROPS, I’d imagine folks who are savvy enough to think of that when booking will book away.
As someone who flies more than 200 segments a year, I will tell you that no airline handles IRROPS very well.
It’s one thing When it’s a localized issue and a few flights are canceled.
It’s another win two or three major hubs are shut down for hours or days. No one has armies of agents, waiting to handle all of that.
Now, if you can pick and choose your hub, stay away from Chicago in the winter and Dallas in the spring, for example? That’s what you try to do.
As a person who travels overseas only for fun, the introduction of Premium Economy is great. I can get a little bit of sleep and get there without my back in pain as I would in coach.
So, if RyanAir offered a Premium Economy is it blowjobs only since there is no bed in Premium Economy?
I’m curious to know how much of this trend has been affected by how the various airlines have been pricing their offerings.
It’ll be interesting to see how the trend holds up in economic downturn…
Truth is in a downturn those with means will still fly, but it is the price sensitive traveler that will vanish & I believe the airlines don’t care if that happens as it would decongest the entire airline system. As Brett has told us many times over the years, the airlines have become much better at revenue management. At this point in a moment of honesty they would admit being happier with empty seats instead of low yielding passengers that don’t acrew to the bottom line.
There is also a relationship between the length of the flight and how willing someone is to pay for an upgrade – and that includes some companies.
Transatlantic from the Northeast is not that much longer than a transcon while most transpacific flights are longer than 12 hours.
Airlines that have fleets that only serve certain global regions – such as DL’s 767s and 333s – have built their configurations around demand for flights of that length as well as the mix of traffic.
UA, and to a lesser extent AA, uses its 777s and 787s across the Atlantic and Pacific and, in the name of fleet simplicity, does not try to create transatlantic and transpacific configurations of those models
DL’s A350s primarily serve long to ultra long haul routes. The 339s do some TPAC but also TATL and the percentage of premium seats isn’t much different from the 333s.
Single hub airlines like Air France, British Airways and the Middle East and East Asian carriers can more easily justify larger premium cabins compared to US carriers that segment demand from multiple hubs, some of which do not have near the level of premium demand.
Economics does determine how many seats an airline can put on an aircraft. The premium configured UA 767-300s have lots of premium seats but they don’t get enough of a premium to offset the much higher CASM because there are plenty of premium seats on larger aircraft with other carriers. It never works economically to have a much more premium aircraft than your competitors unless you have a very high share of the market. ANA and JAL’s 777W configurations prove that.
Finally, aircraft performance has a factor on how premium an airline configures its aircraft. If you need fewer total seats, having more premium seats helps offset the loss of seats. DL’s original delivery 359s and its newest 359s have the same number of combined Delta One plus Premium Select seats but the newer aircraft has 8 more Delta One and 8 fewer PS seats. Delta is clearly positioning the 359 as an ultra long haul capable aircraft including for some of the less capable early models the airline has.
AA has already unveiled the configuration for its premium 789s which can do DFW-Australia and UA is likely to take even more seats off their 789s to extend the range of some of those aircraft to do routes which the current 787s cannot do.
Get you can’t do endless airlines but would’ve been nice to see some other carriers. B6 has a tiny long haul market but no mention of Virgin (one of the first to do PE and with basically a 100% long haul op), LH, AF, KL, JL, QF Etc
Took my first overseas trip this summer and was happy to pay the premium to secure UA Premium Plus seats. I didn’t sleep great, but I was still far more comfortable than I would have been in the back. The meals were fine and the service on both flights felt elevated over coach.
I submitted a miles + money upgrade request, but both of my flights sold all but one or two of the Polaris (and PP seats) before the upgrade process even started. UA may have a lot of premium seats, but the demand appears to be there. I wonder if future cabin upgrades replace a couple of E+ rows with more PP?
I did a transpacific flight on DL recently and the price difference between Main Cabin, Comfort+ (extra legroom) and Premium Select (true premium economy) was such that it was a no brainer to book PS. The price they were asking for Delta One was a whole lot more.
I bit on a cash upsell to United Premium Plus on an ORD-HNL roundtrip last week and about 1.5 months out from departure, I snagged the only remaining seat on both the outbound and return. 100% worth it just for the seat alone – I am 6’2 and have decided I’m just not going to sit in standard economy for flights over 4 hours anymore and UA’s Economy Plus prices on some longer haul flights can be steep, so I thought I might as well spend a bit more and get a better seat and more private cabin. In the past I’ve been burned when trying to upgrade with miles and seeing the cabin sell out completely, so that motivated me to shell out the cash to guarantee comfort.
I suppose they have to be careful about increasing the number of premium economy seats too much and hitting the point where people become confident they will always be able to upgrade with miles and get it.
“Over time, First Class was nearly pushed out of existence, being replaced by an ever-growing Business Class cabin. These Business cabins introduced flat beds in the last twenty years, growing their physical footprint and taking over more of the cabin real estate. Then Premium Economy came to replace Business Class. It was just a shifting of naming conventions, but the one trend was that these premium cabins kept growing.”
Back when there was a true first class, was business class always lie flat? Like there there 2 lie flat cabins and 1 upright seated cabin” I’ve also noticed this change in naming convention and thought that we went from 2 lie flat/1 up right cabin to 1 lie flat/2 up-right
Kip – It was sort of a slow change. Original business class was just like extra legroom way back in the day, but it became more like domestic first class and then eventually went to cradle seats. It was about 25 years when flat beds came to the business class cabin, and that’s when first class started getting squeeze out.