The aviation industry appears to be reassessing the value of first class. Some still think of it as integral to their service offering, but many are struggling to fill seats and a few have decided to eliminate the cabin class from their aircraft altogether.
United is one such airline. In a 2015 interview with Buying Business Travel, the carrier's then president, Jeff Smisek, called international first class a losing business, which has prompted the airline to reconfigure its existing B767-300ERs from a three-class to a two-class cabin set-up without first.
United’s current order book of 14 B777-300ERs, seven B787-9s and 14 B787-10s will not feature a first class cabin at all, further illustrating the airline’s move to distance itself from the product. “[First class is] a money loser, and we will be eliminating it over time,” said Smisek. “The problem is that it takes a lot of real estate, and people are not willing to pay for that. I suspect the other carriers, apart from the subsidised Gulf airlines, would say the same thing.”
PUTTING THE SQUEEZE ON
A key driver behind the declining appeal of first class is the highly competitive business class offerings that have been developed in recent years. Flat-bed seats in long-haul business class are no longer a rarity but are expected as the norm. Combined with multi-course meals served on fine china, state-of-the-art in-flight entertainment systems and personalised service, today’s business class is encroaching into the first class territory of yesteryear.
China Airlines (CAL) is a casualty of this trend. The Taiwanese carrier did offer first class on its B747-400 flights to the US, but retreated from the North American market last year. While it still operates the B747s on a number of short-haul, intra-Asia flights, its first class seats are currently marketed and sold as business class fares.
Meanwhile, CAL’s B747 replacement – the B777-300ER – has been configured to feature only a three-class layout: business, premium economy and economy. Last year, the airline’s chief executive Sun Huang-Hsiang revealed that, “the new Premium Business class is currently adequate for the company’s foreseeable future, and I believe that our customers will be very satisfied with it”.
Impressive business class standards have certainly made an impression on travellers, with several Business Traveller Asia-Pacific forum posters noting that flying with Qatar Airways on business class rivalled the first class experience found on other airlines. “I flew with Cathay Pacific (CX) in first recently, and felt that my experience [on Qatar Airways’ business class] was on par and in some areas even better – and that says a lot as CX is world class,” said ExecPlatAA.
The suite life
While CAL may be eliminating first class soon, its CEO noted that it was cautiously looking into the possibility of introducing a new suites class standard. “Many airlines [have eliminated] first class, and changed to business, premium economy and economy class,” said Sun. “The talk that we’re having now is whether we should [launch] a suites class with much more luxurious amenities and service. But we do not anticipate very high demand for such an offering.”
Singapore Airlines (SIA) was the pioneer of the suites class, which it introduced on the A380 in 2007. However, the airline’s CEO Goh Choon Phong recently revealed that demand for the luxury class has been lukewarm, and SIA will be reducing capacity accordingly once the next batch of superjumbos is delivered.
“Going forward, you can expect we will be reducing the number of suites on the A380s,” said Goh. “What that number is, we’ll announce [in due course]. But the idea is to always better match demand and supply.”
One area on the map that appears immune to the quandary of first class is the Middle East. Etihad Airways’ A380, which it received in 2014, features The Residence. A super-luxury three-room suite, it consists of a living room, bedroom and bathroom and is accompanied by a dedicated Savoy-trained butler service. Despite a hefty US$32,000 price tag for a one-way flight between Abu Dhabi and New York, the product has been a hit.
“We have experienced an overwhelmingly positive response to The Residence within the US – beyond our expectations, in fact,” Etihad’s chief executive James Hogan said last year. “We are seeing healthy forward bookings.”
The reasons for the continuing success of first and suites class in the Middle East include the large numbers of super-wealthy businessmen, politicians and royalty who regularly connect through the region, and the fact that the big three Gulf carriers – Emirates, Etihad and Qatar – have built their reputations and brands largely around their luxury in-flight products, as was recently highlighted by the Emirates advertising campaign featuring Jennifer Aniston.
CHANGING CORPORATE BEHAVIOUR
In an age where information is shared and disseminated easily via the web, publicly listed companies have been forced to change their travel policies in order to appease shareholders.
This was the case last year when DBS Bank found itself in hot water. According to Singapore’s The Business Times, the company’s directors flew their spouses and themselves to London in first class for an annual board meeting. Not surprisingly, the news drew ire from many locals, with some calling it a “blatant abuse of power”.
Of course, with flat-bed seats in business class rapidly becoming the norm for long-haul flights, more and more companies have come to realise that their employees can still enjoy a healthy rest when flying in business, with little to no adverse effects on productivity.
Several Chinese airlines have also removed first class from their domestic fleets in response to dwindling demand that stems from Beijing’s continuing anti-graft campaign. China Southern announced in 2014 that it would rebrand the first class cabin on its domestic aircraft as business class, in order to win back government officials who have been banned from flying in first class in compliance with China’s economic austerity initiative.
A STEP UP FROM FIRST
Of course, some companies still have the financial muscle to fly their executives in first class – but is that the only option for them? The private jet market is booming and an attractive travel option for the
ultra-affluent, especially when travelling in a group.
The price discrepancy may initially raise eyebrows – after all, a return flight between Los Angeles and London on a Privatefly jet would set you back about US$160,000, while the same flight on American Airlines (AA) in first class would only cost about US$11,500.
The key differentiator here is that on a commercial carrier, customers are paying for a single seat, whereas the hefty US$160,000 fee is for an entire Gulfstream G2 aircraft that seats 12. However, booking 12 first class seats on AA would cost a total of US$138,000 – just 14 per cent less than the cost of chartering a private jet. For companies seeking to ferry multiple employees from one place to another, chartering a jet begins to make real economic sense – especially given the added comfort, convenience and kudos.
The old saying that “time is money” is another contributing factor to the appeal of flying private. Unlike commercial airlines, which have to adhere to strict flight operation schedules, private jets are typically more open to fitting into their passengers’ personal schedules. “Travellers are not required to arrive at the airport two hours before departure, and there is no fixed schedule,” says private jet travel provider Vistajet’s chief commercial officer Ian Moore. “They simply need to arrive at a private terminal 15 minutes before departure.”
Complete privacy is also a notable perk of flying private, notes Moore. “Confidential business discussions can be had during flight without worrying that people sitting nearby might overhear the conversation.”
These benefits have been well noted, and the private jet industry is picking up pace, following a slump during the financial crisis. According to a study conducted by RnR Market Research, the global business jet market, worth US$20.9 billion back in 2013, is projected to grow to US$33.8 billion by 2020.
While North America continues to lead the way in this field, Asia is rapidly gaining traction, with major players focused particularly in China. The Greater China area alone is expected to take delivery of 2,000 private jets in the years leading up to 2032.
Asia was Vistajet’s second highest growing market in 2015, with flight traffic into the region increasing by 62 per cent. “We welcomed more passengers onto our jets than ever before,” says Vistajet chairman and founder Thomas Flohr. “Vistajet is still increasing its geographic reach in the US and China. It was particularly pleasing to see Asia become one of our fastest growing markets.”
COMMERCIAL GONE PRIVATE
The advantages offered by private jets have not gone unnoticed by commercial airlines, as a number of high-profile carriers have jumped on the bandwagon and launched similar products.
Etihad Airways announced last December that it had partnered with a private jet charter company, Victor, as a complement to its already impressive First Apartments and The Residence products on the A380. As per the agreement, premium customers who fly with the Gulf carrier on its superjumbo services to London or New York can connect onto Victor’s private jet service to travel onward to destinations within the UK or US.
Meanwhile, Emirates has taken things even further by launching its very own private jet service. Known as “Emirates Executive”, customers can depart from either Dubai or Moscow and fly to more than 20 destinations worldwide, including Hong Kong, Bangkok and Tokyo. “We have seen an increasing demand in the private travel segment, especially in the Middle East and Europe as well as in markets such as India, Russia and China,” says Adnan Kazim, Emirates’ divisional senior vice president – planning, aero-political and industry affairs. “We are looking to tap into this niche market.”
With so many options now available to the upper echelons of the travel community, first class seating on commercial flights may indeed struggle to survive.
