Despite continued cost control in corporate America, and as its bigger competitors gradually move away from domestic premium class products, ATA Airlines is preparing its first-ever business class cabin. Though corporate travel managers have said they aren't loosening policies dictating class of service—in fact, they may be further restricting them—ATA aims to redefine the value proposition by offering modest perks and a little extra comfort at reasonable fares.
Meanwhile, a growing number of international carriers are improving their first and business class products in an effort to capitalize on any growth in premium bookings. "Some corporate clients are looking at reintroducing business class across the water," said Chuck Borchart, manager of strategic sourcing for the Carlson Wagonlit Travel Solutions Group, referring to transoceanic corporate travel policies. "It is being driven by the uptick in the business travel outlook."
Stateside, there is no evidence of a rebound in premium class bookings. ATA, however, expects corporate clients will use its new business class, given the relatively low cap on one-way business class fares: $399. With the same goal in mind, America West Airlines last month introduced two new nonrefundable first class fare types
(BTN, March 15).ATA's foray into premium class is a departure from the traditional low-cost model. The 10th-largest U.S. carrier this summer will begin refitting its fleet, a decision that will help slow capacity growth while presenting year-round revenue opportunities, especially in business markets that have seen an increase in ATA service. It plans to complete fleetwide installations by November.
The product will consist of leather seats in a two-by-two configuration, each 21 inches wide, with seat pitch ranging between 37 and 40 inches. Business class passengers also will receive advance seat assignments, priority boarding and a dedicated checkin counter. Those perks also will be included in an elite travel program ATA plans to roll out next quarter.
ATA hopes its relatively low one-way business class fares will attract price-conscious business travelers, but it also plans to offer $40 day-of-departure upgrades, a strategy similar to that employed by fellow low-cost carrier AirTran Airways. ATA, unlike AirTran, will allow the upgrades no matter the type of fare initially purchased. "We won't be limiting it," said John Happ, ATA senior vice president of marketing and sales. "It will be first come, first serve."
Though it is being billed as a business class product, ATA's premium entry will be "directly competitive with all first class domestic products," Happ said. "Calling it first class would have conveyed an image of something that is far more expensive than it is, and we are targeting the business market. We are re-engineering this airline, trying to make it an option for business flyers."
To that end, ATA will use the new business class to open more doors in the corporate market. "There will be corporate discounts," Happ said, "but we have not yet determined to what extent. For the $40 upgrade on top of the fare they are paying, business travelers have a very reachable price point, arguably as reachable from a corporate travel policy standpoint as anything that has been in the marketplace."
ATA claims more than 1,000 corporate accounts, including more than 600 active ones, meaning they have flown on ATA in the past 12 months under terms of their corporate agreement. Happ, however, acknowledged the carrier "gets enormous support and activity from a relatively small percentage of accounts."
"The recent move by ATA shows there is demand for that type of product and that carriers can steal passengers back from Air Buffet," said Total Travel Management CEO Brent Garback, referring to Warren Buffet's NetJets fractional jet ownership program.
Garback added that commercial carriers may have to take extra steps to bring their services on par with private jet programs that oftentimes include ground transportation components.
"It is about process mapping and moving portal to portal," Garback said. "Airline CEOs need to look at their business less as air transportation but transport in general."
Lufthansa German Airlines said it has heard that message loud and clear from its most elite travelers and now is developing the Top Customer Program. Though few details are available, a Lufthansa spokesperson said the personalized program will focus on ground services and likely will include limousine transfers for qualifying members, a perk already offered by Virgin Atlantic to its top flyers.
A cornerstone of the Lufthansa initiative is a separate terminal in Frankfurt for first class and other elite travelers. Construction already is underway and slated for completion before year-end. Lufthansa also is building a new elite lounge in Munich. The carrier has not yet specified which passengers will qualify for the program, though eligibility likely will be similar to partner United Airlines' premier executive 1K program.
A few other carriers around the globe also have laid out plans for premium product improvements. Spain's Iberia, for example, is investing e100 million to install flat beds in a hybrid first class-business class cabin. The carrier will refit its long-haul planes starting in October, with full deployment expected by the end of 2005.
Iberia also opened special customer service desks designed for premium customers in several Spanish airports and 28 destinations in its worldwide network.
In Asia, Japan Airlines Group said that by June 1 it will offer "a new, simplified and lower-price business class," replacing existing Superseat service. JAL said the new J class is a product of customer research that found business travelers prefer reasonably priced comfort above extensive inflight dining options, which therefore will be replaced with basic beverage service. Each seat will be wider and offer seat pitch of 37.4 inches—six inches more than economy class but three inches less than the current Superseat business class. J Class will be priced at ¥1,000 (about US$10) on top of the regular full coach fare.
JAL also is bringing its newest long-haul business class sleeper seat to more routes, including flights from Tokyo to Chicago, Frankfurt, Los Angeles, Paris and San Francisco. The carrier's newest first class cabin, already installed on the Tokyo-New York flight, this month will be added to Tokyo-London service, followed by Tokyo-Chicago flights later in the year.
China Southern, meanwhile, is adding 24 "new cocoon-style flatbed seats" to premium business class on each of its Airbus A330 aircraft.