As we discussed yesterday, in the long-haul market, premium upsell options have long been part of the game, but in the short-haul market, that has not been the case. It wasn’t all that long ago that airlines almost exclusively sold coach seats. Most of those people sitting in First Class were upgrades. This has changed dramatically, and the announcements of expanded premium offerings just keep coming.
Think back to the dawn of the millennium. United had introduced its Economy Plus extra legroom cabin… primarily as an upgrade opportunity for elite members of Mileage Plus. Sure, if you bought full-fare coach you could sit up there, and eventually there was a subscription product for travelers to buy that would work any time they flew. But this wasn’t really thought of as a direct revenue generator. It was about creating loyalty stickiness.
American lost its mind when it responded with More Room Throughout Coach. It gave everyone extra legroom instead of a small sub-section, but the airline quickly found out that few were willing to pay a higher fare to get that extra legroom. It was a dramatic failure, but it wasn’t just American. United was ready to write off Economy Plus as well until it decided to give it a go and make some money on the cabin. It has never looked back, despite a close call with stupidity after the Continental merger, as I understand it.
Today, all of the biggest US carriers (with one LUVable, glaring exception) have an extra legroom section, and the cabins just keep growing. To illustrate this, let’s take a look at the breakdown of seats across the short-haul fleet for several US airlines:
% of Short-Haul Fleet With Upsell Opportunity
As with the long-haul fleet, United is the champion of short-haul upsell. It’s actually rather remarkable just how much bigger the Economy Plus section is compared to extra legroom sections on the others. Delta comes next on the strength of the largest domestic First Class section in the group.
JetBlue also has a very large extra legroom section, but that makes up for the fact that it has no domestic First Class… yet. Spirit, meanwhile, has its Big Front Seat which I categorized under domestic First Class, and it has exit rows. Frontier has its own extra legroom section which is now morphing into something more.
The real outlier here is, yes, Southwest. Sure, it can sell EarlyBird boarding to get people on the plane earlier, but it has no mechanism to sell extra legroom seats, nor does it have a domestic First Class. It is leaving big money on the table, which would explain why I and many others have speculated that at the very least, an extra legroom seating section will be rolled out at the airline’s investor day in September.
While we all wait to hear what Southwest is doing, other airlines are taking swift action to improve their revenue-generating opportunities. Here’s a look at some of what has been announced (or rumored) in just the last few months.
- Frontier converted the first two rows from an extra legroom section to a European-style business class called UpFront Plus, meaning the middle seat is blocked.
- American is adding 4 First Class seats to 133 A319s (increase from 8 to 12) and 48 A320s (increase from 12 to 16).
- Alaska is adding 4 First Class seats to its 59 737-800s (from 12 to 16) and 6 extra legroom seats on its 79 737-900ERs and 80 MAX 9 aircraft. This increases its premium upsell opportunity from 25.4 percent of seats to over 27 percent.
- JetBlue is rumored to be planning to add a domestic First Class cabin, but this is unconfirmed.
Considering how airlines now sell tickets in bundles or with ancillary add-ons, it makes sense to create more and more upsell opportunities. They do pay for themselves quickly… at least now they do. But will that always be the case? It would seem that there will always be some appetite for something better than regular coach, but it’s also not hard to imagine that the airlines will overshoot on this and end up putting too many seats out there.
Worst case, of course, we’re right back where United started 25 years ago with Economy Plus. If there are too many extra legroom or First Class seats, upgrades are always an option to please your best travelers. Maybe after all these years, loyalty stickiness will come back around again.
Or not. This is about generating direct revenue, and right now, everybody seems pretty bullish on the idea.
41 comments on “The Premium Boom Continues: The Race is On to Grow Short-Haul Opportunity”
The premium boom is in the 7th inning. Leisure travel demand is plateauing from the post-pandemic sugar rush. Consumers will be far more price sensitive going into Fall and Winter. A lot of leisure routes that have been the drivers of premium leisure demand, notably across the Atlantic from the US, are shifting back to their seasonal norms. Routes like Athens, Rome, Nice, etc…don’t work 12 months out of the year, profitably. Even Heathrow is not immune.
The graphic is labeled “Long-Haul” but is short haul.
I dunno.. going Liberia->Denver->Phoenix… that first leg is kinda a long haul :)
I DONT know if those cited short haul percentages include all of the airline-associated regionals, though. Example: I tend to think of United as an international long haul airline with a feed network of mostly outsourced regional jets (esp if you are flying Mesa in/out of Phoenix, you know?)
Cranky – remind us how to pronounce “Liberia”!
Outer Space – Yes, it includes all regionals.
Wayne – Thanks, yes, messed up. I fixed on the website.
In the chart, is Hawaiian lumped in with Alaska?
Outer Space – No, Hawaiian is not represented.
Is domestic Delta One counted as beds in the graph or is the number so small that it’s not visible?
Jason – There is no domestic Delta One from a fleet perspective, so those are left out. This is just by fleet, and the 757s and 767s with flat beds do both domestic and international, so I left those in long-haul.
Started my business travel on Eastern. Was an Executive Traveler. Often upgraded to first. Mileage transferred to Continental One Pass. Often upgraded to first. Became Platinum Infinite and wife and I often upgraded to first. When CO acquired UA, my lifetime card moved to UA. Fewer upgrades. Too many card holding frequent flyers. Retired.
Moved to Malta and fly LH exclusively. They don’t upgrade Star Alliance Gold. That’s OK because my UA Gold gets in Senator Lounges. Top notch experience. Now I pay for biz or first class( they often have long haul first priced same as biz.)
I think moral of the story is that the cheap/free upgrades are done. Accept it. Stop whining, and pay for upgrades when upgrade price is reasonable.
Another moral is that you are customer. They don’t owe you jack.
Malta’s top of our list for retirement. Lifetime UA Gold. Looks like I’m following your playbook. And to your point, if I absolutely want upgrades, I’ll pay for them.
That’s been my playbook for 7 years now: Fly less, buy first, f*** loyalty.
I think a major post-pandemic change here is that the airlines have mostly figured out the right combo of Premium Economy benefits, pricing, etc (the carrots), while conversely making Regular Economy & Economy Minus much less attractive (the sticks).
I haven’t seen specific data on this, but I think pre-COVID (based on my admittedly selective anecdotal memory) Premium Economy was typically priced hundreds of dollars above Regular & Basic… the value proposition simply wasn’t there for a couple more inches of legroom. Now, I find myself booking premium economy much more often now that it’s bundled with more ancillaries and often priced in the same ballpark as Regular Economy. I think that’d be some interesting data to dive into.
If we’re going back 25 years though, I think the framing should be a little different. Premium Economy is essentially what a main cabin ticket was back then… the new products that have been created are Economy Regular & Minus.
Regular economy hasn’t really changed since the pandemic, or if anything it’s better since change fees are minimal to none now on regular tickets compared to the $50-200 they were before.
It was 15-20 years ago in the mid to late 2000s that economy class changed, losing out on free bags and meals, although of course not everyone valued those things anyway.
The airlines might as well convert capacity into premium product when they have an excess of capacity as it is.
One thing that’s left out of the discussion. With the airlines making big dollars with their Italians with credit card companies, you are seeing significant Premium seats going to people using miles paid for from credit cards.
I am a longtime executive platinum on American, and I fly enough to be at the top of the list most of the time. And I still get upgrades on mainline flights maybe half the time best, probably less.
Obviously, I would prefer to have the upgrade, I’m not complaining. It makes it easier to use my own miles for upgrades for other people. Plus, if someone’s willing to pay more for the upgrades… Maybe that means my fear won’t be quite as much.
PS on a different note where is Tim? I mean, we’ve heard so much about how wonderfully Delta is run… And yet they are struggling a lot more with the tech outage and they’re still having problems for three days later?
I suspect Tim is just lying low and waiting until DL’s meltdown is over.
I do hope someone is able to put together why Delta is having so much more trouble recovering from the outage than other airlines that were originally impacted just as badly.
This would be a good reminder from CF that people will participate when they want as I did yesterday. There is no need to reference anyone that isn’t in the conversation already
This is a civilized site thanks to CF’s leadership
He did a great job w this analysis
Brown nosing Cranky will only get you so far, Tim. LOL We all know what you’re really about, and we know that you’ve been bounced from other blogs, so don’t play the “civilized” card with us.
Sr. Tim was plenty active yesterday on several other air transport blogs. Possibly warmup for the pending bombardment of this site??
Not that it would surprise anyone here, but Sr. Tim was merely warming up yesterday, just as Delta’s crew-scheduling software was warming up. Today, he has expressed pity for the son of said air transport blog’s owner and impugned his parenting skills. Just wait for the upcoming fireworks on this site…
“ There is no need to reference anyone that isn’t in the conversation already
This is a civilized site”
Isn’t the logical extension of that that airlines not in the blog article not be “reference[d]”? If Mr. Cranky imposed that, that would could down on His Highness’ drivel 50%, minimum…
Life pro tip – people who don’t repeatedly and annoyingly inundate a blog’s comment section with lengthy, irrelevant, topic hijacking and blatantly self serving word salads aren’t negatively discussed in absentia.
Tim is busy trying to figure out how to explain Delta’s way out of this and make it seem like this is actually a good thing for Delta, and American is who really should be ashamed.
The real trick is going to be to find the “sweet spot” where there’s the right balance between low fare offerings and upgraded services and amenities – one that can weather possible changes in consumer preferences. And that “sweet spot” may be a bit different for each carrier.
Signed,
Captain Obvious
The airlines got religion maybe 10 or 15 years ago. Why “give” away upgrades when you can yield manage first class and sell it at the best marginal revenue possible. Before, everybody had their upgrade games (me included). Now, I just buy first.
If I ran United, American or Delta, I just would get rid of first class upgrades. period. You want first? You pay for it! Or you use your miles on it — and it ain’t cheap! Perhaps when that happens — and I believe it will sooner or later — you save millions of dollars in upgrade tracking, ranking and free-seat give-aways. You get smart and, maybe, because everybody is paying for first class, you insert better service into the front cabin.
Honest question that I don’t know the answer to – and would be interested to see more analysis about. I’d think the *prospect* of an upgrade has some indirect financial value because it helps sell seats in the back of the plane, builds goodwill, and/or keeps people in the loyalty program.
In other words, if you remove the benefit of upgrades, does that cost you more value in lost credit card customers than the lost value of the upgrades?
100% – the upgrades are aspirational, and people significantly overestimate their chances of getting them and overestimate the value they’ll get vs. a paid fare. Good business for what’s at least partially a status good.
Davey, I can tell you the reason they won’t stop giving out upgrades.
I fly 200 segments a year, maybe more. Plus I tend to buy my tickets late. I spend a lot of money on airfare. I fly American about 90%, maybe more. Some of that is because I live in the Dallas area, but I often go out of my way to fly them even on other trips (I fly all over, not just out of DFW).
If they take away first class upgrades, why would I keep doing that? I’ll just go with whoever is either the cheapest or the most direct.
They give me the chance to earn upgrades, to keep me flying on the airline and spending good money on airfare. There are many times when I may pay $400 for a one-hour flight at the last minute, and I wind up in Seat 38E…even though no one else in coach and probably half of first class paid as much for their ticket as I did.
They know that if they offer me the carrot of the available upgrade, I’ll do that. If they don’t, I might jump over to a different airline, and give THEM that big fare money.
I didn’t mind the old 500-mile “stickers” that AA used to have. You got X number every 10,000 miles or something, or you could buy them. I think Exec Plats got unlimited. But for a middle tier elite, it was a good deal. First was a better product even with meals on like ORD-DFW and JAX-DFW and ORD-LGA. And you could pick and choose when to cash in your upgrade, in exchange your chances of getting it were much better (for the mid-tier folks).
Yeah the middle tier getting hosed now. Basically little advantage to it.
yesterday I shared one reason I’m willing to pay a premium for United over American – IRROPS handling with United is much nicer than the AA line of doom with 2 agents dealing with 139 customers.
Today I’ll share one reason I’m willing to book AA over UA: after booking I loveeeeeeee the option to pick segments to upgrade to first. I don’t care about first on a 48 min connection, but for the flight from phx to wherever is about 4ish hours away, I’m happy to try my luck and often snag an upgrade for about $200.
@Cranky How you get 15.2% of Frontier’s seats being extra leg room? Their premium seats are limited to the first 3 rows of the aircraft (and you may have to exclude the 4 middle seats if the aisle/window paid not to have a middle seat) and emergency exit rows. Your numbers maybe off
Brian – It’s also exit rows. I don’t exclude middle seats, those count.
So you have 3 rows at the front plus the exit rows. You can see it on the seat map here: https://www.flyfrontier.com/about-us/aircraft-configuration?mobile=true
Though I did not do Upfront Plus here, this was from before that. So now there are 4 fewer seats with extra legroom and 4 fewer seats on the airplane.
Great timing…Douthwest announcing this morning they are going to assigned seating. As John McClain would say, Welcome to the party, pal.
Grab the popcorn and enjoy the show!
@Crankey Why did you decide not to include routes that are sold as dedicated flights with lie-flat seats such as JFK-LAX on AA and DL and EWR -LAX on UA. On DL it is sold as Delta One and on UA it is sold as Polaris. Besides EWR- SFO on UA and JFK-SFO on DL there are other routes such as EWR-HNL that are dedicated lie-flat seats. I understand flights or routes where it is not the expectation such as on UA SFO-BOS. But would count routes where it is expected
I can’t speak for Cranky, but it sounds like he did this analysis based on aircraft seats, not flight seats.
Also, while I’m not sure exactly where Cranky drew the line, cross-country routes and flights to HI would not be considered “short-haul” by many (even if domestic), given that they are of similar/greater distances than routes like EWR-LHR.
Kilroy is right, this is by fleet and not by flight. So, I consider all widebodies to be part of the long-haul fleet except for United’s domestic-configured 777s which have the sliver of flat beds you see. For AA, it’s the A321T that has the flat bed sliver. I also consider any United 757s (all have beds) and the Delta 757s that do have beds to be long-haul.
Actually if I zoom way in I see a tiny sliver of bed seats on UA and AA.