How Airlines Profit From More Premium Cabin Space

Aircraft cabin space is some of the most expensive real estate on the planet. Airlines have struggled over the decades to make that limited and highly-regulated square footage pay off. The International Air Transport Association’s latest estimated average airline profit per passenger is merely $2.25 in 2023. But the premium segment of the aircraft cabin is growing, helping to balance the equation.

United Airlines joins several airlines worldwide that have profited from a trend towards lusher, more comfortable, business class, and premium economy cabins. Passengers are the ultimate winners in this trend, as aircraft cabin designers have set new standards for comfort.

United Airlines Premium Cabins Perform Well

“Demand for premium products remains high, with great success in the premium economy cabin, where revenue has outpaced capacity growth since its introduction in 2019. In total, revenue from premium products was up 20% year-over-year in the quarter, accounting for more than half of all passenger revenue,” United Airlines reported in its third quarter 2023 financial results.

United’s Star Alliance partner Lufthansa also reported gains from premium offerings. According to the airline, the Premium Economy cabin is the most productive in revenue by square foot—6% higher than the Business class and 33% higher than the Economy class.

First Class Has Evolved And Been Rebranded As Premium Economy

The type of reclining seat featured in most of today’s Premium Economy class cabins would have qualified as First-class seats in the 90s. And that is part of what makes this particular cabin optimal. It offers affordable comfort to more passengers without sacrificing valuable aircraft square footage. For some business travelers, a premium economy booking looks better on travel expense reports than a business or first-class ticket. It is also an attractive cabin for leisure travelers flying long-haul flights who don’t want to overspend their travel budget on airfare.

In this sense, premium economy class is a ‘goldilocks’ class for airlines and passengers alike. Not too pricey to install, nor too costly to maintain, and not too expensive to fly. It’s just right. As an added incentive, airlines offer premium perks, including special menus, amenities, and priority boarding.

Lufthansa Group airline SWISS recently announced it would increase the cabin space allotted to Premium Economy on its new A350 aircraft, making room for 38 seats onboard. SWISS’s Chief Commercial Officer, Tamur Goudarzi Pour, said the cabin has “proved very popular.”

Even Emirates Joined The Premium Economy Trend

Emirates, despite or perhaps because of its reputation for offering luxurious cabins, was a hold-out on the Premium Economy trend even as competitors increasingly adopted it. However, the airline embraced the Premium Economy cabin in high style in 2022. Opting for an opulent quilted ivory leather, Emirates made this cabin a crucial part of its $2 billion cabin retrofit program. Emirates will add 1,608 Premium Economy seats to its A380 fleet of 67 aircraft and 1,032 Premium Economy seats to its 53 B777 aircraft. After announcing the Premium Economy, the airline launched aircraft outfitted with the new cabin on competitive routes, including London Heathrow, New York JFK, San Francisco, Sydney, and Singapore. It has launched on more routes since and will be available on the entire fleet when the airline completes its retrofit program by April 2025.

Delta Air Lines Business Class Innovation Surpassed First Class

When Delta Air Lines
DAL
introduced the Delta One suite in 2016, it raised the bar on premium by introducing what had been a limited first-class-only product into business-class cabins. Optimizing the use of space while granting passengers unparalleled privacy by adding a door was a winning combination. The airline took the initiative to pass the stringent proof of testing for a new seat design, which often delays innovation in the cabin.

In its most recent financials, Delta Air Lines reported premium revenue growth of 17% year-over-year, outpacing the main cabin by 5 points. This proves the attractiveness of premium cabins to the airline’s customers.

Since then, competitors have followed Delta’s lead. Business class pod-style, lay-flat seats still fly with many airlines. They were considered a cabin revolution when Air France and British Airways first introduced them at the turn of the millennium, and they make good use of space. But the business suite is today’s great differentiator.

Recent introductions include Qantas’ new ultra-long-haul A350 cabins, which will feature 52 Business suites and 40 Premium Economy seats.

Japan Airlines’ new A350 will also bring Business class suites with privacy doors onboard. JAL is confident of demand for this product, offering 54 Business suites and 24 Premium Economy seats on its aircraft.

Hawaiian Airlines introduced the Leihōkū Suites on its new Boeing 787-9 Dreamliner, which will take off next Spring. This premium cabin features 34 suites with private doors.

First Class Endures As A Business-Jet Alternative

Some airlines have left First class in the past, replacing it with a first-class worthy business product. On other airlines, it endures as a rarefied cabin, competing with private jet experiences by offering a more exclusive and luxurious passenger experience. It most commonly offers a separate bed and seat option, and room for a companion onboard.

SWISS has reduced the number of first-class suites on its A350 to three, with the middle suite available as a double. Japan Airlines made room for six first-class suites onboard its new A350. Qantas added six First Class suites on its A350-1000 that will fly to New York starting in 2025.

Virgin Atlantic added first-class Retreat Suites to the first row to its Upper Class cabin on the A330-900neo with an innovative Vantage XL product developed by Thompson Aerospace.

Flying first class on a commercial carrier is still significantly cheaper than hiring a private jet for a long-haul flight. While private jet services offer the convenience of flying out of an fixed based operator and avoiding the stress of commercial airports, airlines have the price and network advantage with convenient connections.

Economy Class Today Is Better Than Flying On The Concorde

There’s a lot of understandable griping over narrow and crowded Economy cabins, but part of the premium trend is that airlines have added more economy-plus products, which often offer more legroom and other perks.

With sizable in-flight entertainment screens and ergonomically designed seating in modern open cabins that offer natural light and stunning views from large aircraft windows, today’s economy class passengers can enjoy a better flying experience than the ultra-rich enjoyed on the Concorde. That legendary aircraft cabin had narrow aisles, narrower 17” seats, and tiny windows that barely allowed a view. Granted, Concorde passengers got better meals, champagne, and white-glove service. Plus, they only had to endure the crowded cabin for four to five hours. It’s all relative.

Ultimately, passengers decide how they fly with their wallets. Airlines are incentivized to innovate when people pay more for that valuable, limited square footage onboard. In many cases, passengers just want to get there on a budget, and airlines allow room for that, too.

According to United, “Basic Economy has also provided another popular option for customers and has been a great competitive offering, with revenue for that product in the quarter up 50% year-over-year.”