Many airlines have in recent years added space to their Business Class products, some even turning their seats into beds when in full recline. Simultaneously, they have made Economy seating more dense.
For Business Class passengers willing and able to pay the extra, it has been good news, while for people in Economy, prices have remained low, so a little discomfort has been worth tolerating. Cost-conscious business travellers, however, feel a little aggrieved – it’s not much fun flying long-haul surrounded by holidaymakers. For these passengers, and for wealthier leisure travellers, Premium Economy was born as a hybrid between the two classes.
It was three far-sighted carriers – Taiwan’s EVA Air, Virgin Atlantic and later, British Airways (BA) – that first realised customers needed another seating option in the early 1990s. Priced at a surcharge on the regular Economy class, Premium Economy offered sufficient comfort for long flights at a value-for-money price compared with Business Class.
Mike Wang, UK and Ireland sales and marketing manager for EVA Air, which flies from London Heathrow to Bangkok and Taipei, says: “We have had excellent feedback from our customers since the introduction of Elite Class (EVA Air’s Premium Economy brand). This is now our most popular product for long-haul flights and has secured a loyal following from both business and leisure travellers.”
Another benefit for an airline with Premium Economy is that it can be a useful marketing tool for upgrading or, if a flight is overbooked, downgrading passengers. Canny BA gold-tier loyalty members book Premium Economy in the hope they will be upgraded to Business Class. For its part, BA earns respectable revenue when a passenger is upgraded from Premium rather than regular Economy, while passengers who are not upgraded can console themselves that at least their flight will be reasonably comfortable.
Premium Economy is also a lifesaver for hard-pressed airport staff, as a downgrade from Business Class to Premium Economy will be more palatable than Economy.
Despite all these apparent advantages, most airlines have continued to ignore Premium Economy, and only now, as company travel budgets have been squeezed during the downturn, is it gaining global acceptance. The past couple of years have seen Air New Zealand and Qantas adopt Premium Economy along with Japan’s ANA and JAL, Icelandair and Bmi.
The most significant convert in 2009 was European heavyweight Air France. Italy’s Alitalia is set to join the club in the early part of this year, while there are rumours that Abu Dhabi’s Etihad is mulling over a Premium Economy zone for its Airbus A380s scheduled to be delivered in 2012.
Why has it taken so long? When questioned by Business Traveller, almost every abstainer said there was “no demand” for the class. But in reality, whether an airline adopts the product or not is all down to the level of competition they face. Big players such as American Airlines, Emirates, Lufthansa and Singapore Airlines (SIA) balk at the bother and cost of reconfiguring their fleets simply for the sake of competing with Premium Economy carriers on a select number of routes. Only when more big airlines join in will they be forced to re-examine their seating policies.
Cathay Pacific is more forthright. Last year, Tony Tyler, its chief executive, said in industry magazine Airliner World that the carrier “had looked at introducing Premium Economy a number of times but couldn’t get the sums to add up”.
But matters are changing rapidly in today’s economic climate. In a statement to Business Traveller, Cathay says it has begun to conduct a top-down analysis of the business. It says: “We are looking at every aspect of our operation. Premium Economy is one of the many options that we are studying, although no decision has yet been made.”
For their part, Emirates and SIA still maintain they have no plans to introduce the product, and their views are echoed by American Airlines, Continental, Korean Air, Delta/Northwest and many others.
Some carriers have taken another approach, preferring to dip their toes in the water rather than go to the expense of creating a separate cabin with special seating. United Airlines and KLM have extended the seat pitch in the first few Economy Class rows and are allowing full-fare passengers or higher ranking frequent-flyer programme members to occupy them. It is a cost-effective solution that enables them to satisfy the needs of their more profitable customers. The drawback is that seating cannot be guaranteed as it tends to be allocated on a first-come-first-served basis.
One problem with Premium Economy is that there are no consistent standards. The three carriers that instigated the class all those years ago have made few, if any, changes. It means that, in the case of BA, the product is looking tired and the airline has no immediate plans to update it.
Still, during BA’s inaugural Las Vegas service at the end of October, chief executive Willie Walsh told Business Traveller: “I think there are things we can do to enhance that product – it’s one of the issues under consideration.”
There is no doubt that recent converts have moved the product ahead. In particular, ANA just unveiled in February an upgraded Premium Economy that is in a different league to other carriers’ products. (It will enter service on the airline’s Boeing B777-300ERs between Tokyo and New York.) Seating will be eight across (2-4-2), so there’s nothing special there, but the positive side is that ANA is boosting legroom from 38 to 42 inches (consider that until 15 years ago Business Class offered in the region of 40 inches), while seats now come with a 12-inch TV screen, iPod connection and privacy dividers.
It means Premium Economy is moving upmarket, but the risk is that it will desert its value-for-money ethos. An ANA spokeswoman says: “Our new product’s seat pitch is one of the best in the market. We decided to take this direction because of customer research. We also felt it was important to offer the level of service and comfort our customers deserve in every class. In the current financial climate, many business travellers are downgrading.”
But might it be a mistake to narrow the gap between Business Class and Premium Economy? “There are still a number of obvious differences between the two,” the spokeswoman says. “Our new Business product now features a flat bed and more than 30 dishes on a mix and match à la carte menu, on demand, which you don’t get in Premium Economy.”
Even so, is there a danger that by introducing “comfort creep”, costs will rise, which will then have to be passed on in the form of higher fares? “At the moment, our future pricing is not yet decided because Europe will not see our new Premium Economy cabin until the second or third quarter of 2010,” ANA says. “Obviously we will monitor the market situation closely, but ‘comfort creep’ will not be a main factor behind any fare increase.”
Nevertheless, this is another worry and is also of concern to Economy passengers. To justify higher prices in Premium Economy, some airlines have begun to downgrade their regular Economy classes further. Icelandair set the ball rolling when it launched Economy Comfort in 2008. It then abolished free food and drink in normal Economy Class on both short- and long-distance routes. And because Icelandair carries many transit passengers between Europe and the US via Reykjavik, journey times are lengthy, making it difficult for passengers to avoid shelling out for onboard catering.
Now Air France has announced it will make downgrades. While it will still offer free catering, it will differentiate its new Premium Voyageur class (now being rolled out across much of its fleet, except the B777 serving Caribbean and Indian Ocean destinations, the B747s that are being phased out, and, for the time being, the A380) by installing denser economy seating in its fleet of B777s.
These wide-bodied aircraft are rostered for Air France’s most important routes, with Economy seating being retrofitted in a denser 10-across (3-4-3) configuration rather than the regular nine-across (3-3-3) layout. In the years ahead, others may follow.
Another obstacle Premium Economy faces is that, when sold at normal prices, it offers little if any advantage over discounted Business Class – compare the Premium Economy rates offered by BA and Virgin Atlantic between London and major Asian cities such as Bangkok, Hongkong or Singapore with the discounted Business Class rates offered by the likes of KLM, Lufthansa and Gulf-based carriers.
So the way to make Premium Economy a success is to price the product as attractively as possible, using either seat sales or year-round keen tariffs. The latter is the direction EVA Air has taken. Mike Wang says: “Flying Elite Class with EVA Air typically costs only about 25 percent more than Economy Class travel. We believe our aggressive pricing is a key factor in its popularity. We monitor customer satisfaction levels closely and find travellers who experience the product are very happy with it.”
It was three far-sighted carriers – Taiwan’s EVA Air, Virgin Atlantic and later, British Airways (BA) – that first realised customers needed another seating option in the early 1990s. Priced at a surcharge on the regular Economy class, Premium Economy offered sufficient comfort for long flights at a value-for-money price compared with Business Class.
Mike Wang, UK and Ireland sales and marketing manager for EVA Air, which flies from London Heathrow to Bangkok and Taipei, says: “We have had excellent feedback from our customers since the introduction of Elite Class (EVA Air’s Premium Economy brand). This is now our most popular product for long-haul flights and has secured a loyal following from both business and leisure travellers.”
Another benefit for an airline with Premium Economy is that it can be a useful marketing tool for upgrading or, if a flight is overbooked, downgrading passengers. Canny BA gold-tier loyalty members book Premium Economy in the hope they will be upgraded to Business Class. For its part, BA earns respectable revenue when a passenger is upgraded from Premium rather than regular Economy, while passengers who are not upgraded can console themselves that at least their flight will be reasonably comfortable.
Premium Economy is also a lifesaver for hard-pressed airport staff, as a downgrade from Business Class to Premium Economy will be more palatable than Economy.
Despite all these apparent advantages, most airlines have continued to ignore Premium Economy, and only now, as company travel budgets have been squeezed during the downturn, is it gaining global acceptance. The past couple of years have seen Air New Zealand and Qantas adopt Premium Economy along with Japan’s ANA and JAL, Icelandair and Bmi.
The most significant convert in 2009 was European heavyweight Air France. Italy’s Alitalia is set to join the club in the early part of this year, while there are rumours that Abu Dhabi’s Etihad is mulling over a Premium Economy zone for its Airbus A380s scheduled to be delivered in 2012.
Why has it taken so long? When questioned by Business Traveller, almost every abstainer said there was “no demand” for the class. But in reality, whether an airline adopts the product or not is all down to the level of competition they face. Big players such as American Airlines, Emirates, Lufthansa and Singapore Airlines (SIA) balk at the bother and cost of reconfiguring their fleets simply for the sake of competing with Premium Economy carriers on a select number of routes. Only when more big airlines join in will they be forced to re-examine their seating policies.
Cathay Pacific is more forthright. Last year, Tony Tyler, its chief executive, said in industry magazine Airliner World that the carrier “had looked at introducing Premium Economy a number of times but couldn’t get the sums to add up”.
But matters are changing rapidly in today’s economic climate. In a statement to Business Traveller, Cathay says it has begun to conduct a top-down analysis of the business. It says: “We are looking at every aspect of our operation. Premium Economy is one of the many options that we are studying, although no decision has yet been made.”
For their part, Emirates and SIA still maintain they have no plans to introduce the product, and their views are echoed by American Airlines, Continental, Korean Air, Delta/Northwest and many others.
Some carriers have taken another approach, preferring to dip their toes in the water rather than go to the expense of creating a separate cabin with special seating. United Airlines and KLM have extended the seat pitch in the first few Economy Class rows and are allowing full-fare passengers or higher ranking frequent-flyer programme members to occupy them. It is a cost-effective solution that enables them to satisfy the needs of their more profitable customers. The drawback is that seating cannot be guaranteed as it tends to be allocated on a first-come-first-served basis.
One problem with Premium Economy is that there are no consistent standards. The three carriers that instigated the class all those years ago have made few, if any, changes. It means that, in the case of BA, the product is looking tired and the airline has no immediate plans to update it.
Still, during BA’s inaugural Las Vegas service at the end of October, chief executive Willie Walsh told Business Traveller: “I think there are things we can do to enhance that product – it’s one of the issues under consideration.”
There is no doubt that recent converts have moved the product ahead. In particular, ANA just unveiled in February an upgraded Premium Economy that is in a different league to other carriers’ products. (It will enter service on the airline’s Boeing B777-300ERs between Tokyo and New York.) Seating will be eight across (2-4-2), so there’s nothing special there, but the positive side is that ANA is boosting legroom from 38 to 42 inches (consider that until 15 years ago Business Class offered in the region of 40 inches), while seats now come with a 12-inch TV screen, iPod connection and privacy dividers.
It means Premium Economy is moving upmarket, but the risk is that it will desert its value-for-money ethos. An ANA spokeswoman says: “Our new product’s seat pitch is one of the best in the market. We decided to take this direction because of customer research. We also felt it was important to offer the level of service and comfort our customers deserve in every class. In the current financial climate, many business travellers are downgrading.”
But might it be a mistake to narrow the gap between Business Class and Premium Economy? “There are still a number of obvious differences between the two,” the spokeswoman says. “Our new Business product now features a flat bed and more than 30 dishes on a mix and match à la carte menu, on demand, which you don’t get in Premium Economy.”
Even so, is there a danger that by introducing “comfort creep”, costs will rise, which will then have to be passed on in the form of higher fares? “At the moment, our future pricing is not yet decided because Europe will not see our new Premium Economy cabin until the second or third quarter of 2010,” ANA says. “Obviously we will monitor the market situation closely, but ‘comfort creep’ will not be a main factor behind any fare increase.”
Nevertheless, this is another worry and is also of concern to Economy passengers. To justify higher prices in Premium Economy, some airlines have begun to downgrade their regular Economy classes further. Icelandair set the ball rolling when it launched Economy Comfort in 2008. It then abolished free food and drink in normal Economy Class on both short- and long-distance routes. And because Icelandair carries many transit passengers between Europe and the US via Reykjavik, journey times are lengthy, making it difficult for passengers to avoid shelling out for onboard catering.
Now Air France has announced it will make downgrades. While it will still offer free catering, it will differentiate its new Premium Voyageur class (now being rolled out across much of its fleet, except the B777 serving Caribbean and Indian Ocean destinations, the B747s that are being phased out, and, for the time being, the A380) by installing denser economy seating in its fleet of B777s.
These wide-bodied aircraft are rostered for Air France’s most important routes, with Economy seating being retrofitted in a denser 10-across (3-4-3) configuration rather than the regular nine-across (3-3-3) layout. In the years ahead, others may follow.
Another obstacle Premium Economy faces is that, when sold at normal prices, it offers little if any advantage over discounted Business Class – compare the Premium Economy rates offered by BA and Virgin Atlantic between London and major Asian cities such as Bangkok, Hongkong or Singapore with the discounted Business Class rates offered by the likes of KLM, Lufthansa and Gulf-based carriers.
So the way to make Premium Economy a success is to price the product as attractively as possible, using either seat sales or year-round keen tariffs. The latter is the direction EVA Air has taken. Mike Wang says: “Flying Elite Class with EVA Air typically costs only about 25 percent more than Economy Class travel. We believe our aggressive pricing is a key factor in its popularity. We monitor customer satisfaction levels closely and find travellers who experience the product are very happy with it.”
