The major U.S. airlines offer a range of service levels in the hope of appealing to a range of customers. Domestic first class and international business class attract the least price sensitive customers with capacious seats, ample storage space, and premium amenities. From there, things go downhill – from “premium economy” to the dreaded “basic economy,” seats shrink and amenities disappear.
This pricing model seems to serve the airlines well, although their price segmentation approach has resulted in a basic product that is unarguably worse than the basic product of a few decades ago. Seats and lavatories are smaller than ever, and fees are imposed for amenities that used to be free.
Airlines have realized the degradation of customer experience for economy passengers can’t continue forever. While no major airline has begun ripping out the most-cramped seats or comically small lavatories, they have begun to invest in features that improve the in-flight experience, even for the rear cabin.
Booming First Class, Premium Demand
Flyers are increasingly willing to pay more for a better experience, and the major airlines are expanding their premium seat options. Delta has set a goal of 37% of its revenue for premium seats, nearly as much as the 40% they expect from economy seats. That’s up from their estimated current year split of 35% for premium vs. 44% for economy. (The balance of Delta’s revenue comes from “loyalty and other.”)
The Problem with the Premium Experience
The typical first class experience on a major U.S. airline must seem like unparalleled luxury to European travelers, where short-haul “business class” seats are the same spartan seats found in the rest of the plane. There might be a bit more leg room, and the middle seat is left empty.
But even the expansive leather seats, hot meals, and proper wines don’t deliver U.S. customers a true first-class experience. The first class passengers are seated first, but they must wait for 150+ more passengers to file past. It typically takes 25 minutes to fully board an airplane the way most major airlines do it, and front cabin passengers have a literal front row seat for the entire process.
Front cabin passengers also share the often cramped, sometimes chaotic gate area with everyone else on the plane. For the major U.S. airlines, a first class domestic ticket doesn’t include lounge access.
Upon arrival, front cabin passengers have the advantage of a quick, unimpeded exit. If they checked a bag, though, they’ll simply be the first to begin waiting for luggage to be offloaded and delivered to the carousel – another crowded and chaotic experience.
I don’t deny that spending a few hours in a first class seat is far more desirable that the same experience in basic economy. Except for the in-cabin space and service, though, the overall customer experience doesn’t differ much from the other classes of service.
One All-Business Airline
A host of startup airlines have tried offering an all-first or all-business experience, but only one remains. La Compagnie offers exclusively business class service between Paris and Newark, using two Airbus A321neos with 72 lie-flat business class seats. They claim to offer a better overall experience and lower prices.
I tried pricing a trip from New York to Paris about a month in the future and found La Compagnie’s fares ranged from $1,731 to $2,606 depending on the day of the week. The major U.S. carriers all had business class pricing in the $3,400 to $3,800 range.
La Compagnie offers an improved experience outside the aircraft, too. They offer fast-track security access and a lounge for waiting. With just 72 passengers, boarding and getting off are faster, with no jousting for limited bin access. One travel writer compared the experience to traveling on a private jet.
Can an All-Business Airline Survive?
La Compagnie hit profitability in 2022 and has two more aircraft on order. They plan to use the planes to offer service to New York from an undisclosed European airport. Their apparent success suggests that other major routes could also support a similar type of service.
But, finding one route with enough demand to support two aircraft is a long way from making the business case for all-business class travel. Both independent startups and established airlines have offered it in the past, and none of those efforts survived to the present.
According to Forbes Contributor and former Spirit Airlines CEO Ben Baldanza, there are multiple reasons why a business class-only airline won’t work.
Challenges for an All-Business Airline
Flying only premium passengers means that schedules will be limited. Even on a major route, frequent departures throughout the day are impractical. La Compagnie’s basic offering is a single flight per day each way between New York and Paris, with limited seasonal flights to Nice. The only ticketing integration they have is, oddly, European carrier EasyJet. The latter is a budget airline not known for luxurious service.
Beyond that, the vast majority of air travel doesn’t just happen between major hubs. If I want to fly to Paris from Austin, I’d have to connect in another airport – Houston, Dallas, Newark, Frankfurt, and London are a few possibilities. Flying in the front cabin to Newark would cost me about $900 round-trip. I might save money by switching to La Compagnie in Newark vs. continuing the trip with United, but it would come with the hassles of separate reservations. There’s the opportunity cost of not accruing points toward maintaining elite status on United, an important issue for frequent travelers. And United’s Polaris class, their name for first/business, has its own advantages, like access to the excellent Polaris lounge system and (usually) better lie-flat seats.
Baldanza also points out that demand for business class seats fluctuates. Much of the demand comes from business travelers, and when times are difficult corporate travel budgets plummet.
Demand fluctuation hits an all-business airline particularly hard. On a typical major airline, if they don’t sell all the premium seats, they can award them to their best frequent flyers. This builds loyalty and frees up room in economy for budget-minded flyers. On all-business flights, an airline can only fill the cabin by cutting prices. This kills profits and ultimately devalues the product.
Colliding Trends
As more travelers demand premium service, will any type of all-business flights emerge? The model La Compagnie has developed doesn’t look scalable – it’s too dependent on a small number of high-volume routes and doesn’t integrate with major airline networks or rewards programs.
On the other hand, if the major airlines are faced with devoting more cabin space to premium passengers, they will lose some of the flexibility they currently have to cope with downturns in demand. Could cherry-picking some routes for a small number of premium-only flights be one way of meeting that demand with less reallocation of space on current aircraft?
An existing major airline offering an all-business route between, say, New York and Los Angeles wouldn’t have to discount the price like La Compagnie. They could simply integrate it into their schedule and attract flyers looking for a better customer experience.
Baldanza is likely right that the numbers simply won’t work for this kind of service. But, it’s intriguing to wonder what could happen if the demand for high-end seats keeps rising.
Read the full article here