Despite eroding traffic and revenue trends plaguing the air transport industry, some carriers continue to focus on their premium products in an effort to draw in high-yield passengers.
Those efforts, however, will go only so far in countering corporate travel cutbacks, including more restrictive premium class policies. Though some companies allow travelers to fly business class on flights longer than six hours, others have upped the threshold to 10 hours or more, effectively eliminating premium travel to Europe. Others are examining business class policies on specific, heavily traveled international routes as a means to immediate cost savings.
At the same time, carriers have been incentivizing corporate accounts to maintain at least some level of premium class bookings through both hard- and soft-dollar offerings, notably upgrade programs. "One carrier asked if we would consider putting our travelers in business class if it were discounted to cost just a little more than coach," said Betty Moilanen, senior manager of international sourcing for travel at Denver-based J.D. Edwards.
Northwest Airlines this summer extended its BizFlex fares to first class, offering seats in the front of the plane at a 50 percent discount when booking at least two weeks in advance (BTN, June 25).
While deeper discounts target corporate buyers, improved products are meant to lure their travelers. The newest is Singapore Airlines' revamped Raffles product. A $100 million investment will place fully flat beds in the business cabin of the carrier's 45 long-haul Boeing 747s and 777s. Dubbed SpaceBed, the sleeper seat will be the longest and widest of its kind. It will be complemented by an expanded inflight entertainment system and power adapters for laptops, to enable business flyers to do work, send e-mail and browse the Internet. The first refit 747 will begin service in November, with complete installation across the fleet continuing throughout 2002.
Meanwhile, David Noyes, British Airways executive vice president of sales and marketing for North America, said the timing of the carrier's enhanced business class, launched last year, (BTN, Sept. 4, 2000) was either "immaculate or lucky." Though he acknowledged that travel volume in business class has been slowing, Noyes said BA's share of business class passenger traffic remains firm and, in some markets, even has increased. "Travel managers need a degree of choice and we are offering options," Noyes said. "Both the business class beds and the World Traveler Plus premium economy cabin give us a strong selling position, offer a real value proposition and position us very well against competitors."
BA's strategy of focusing on high-yield traffic is paying off, to some degree. In it latest earnings report, BA reported a passenger yield increase of nearly 13 percent, despite a slight decline in overall passenger revenues and a 48.5 percent drop in operating profit. Non-premium capacity was reduced more than 11 percent, while premium capacity shrunk less than 2 percent.
Swissair is reported to be mulling over flat beds in business class but details were not available and the company would not confirm those reports. However, along with partner Sabena, Swissair recently opened a new business class lounge in Brussels.
Action On The Alliance Front
Meanwhile, the Star Alliance last month in Swissair's Zurich backyard opened its first alliance airport lounge. The facility, which will serve as a prototype for future Star Lounges, is available to first and business class passengers and Star Alliance Gold members. The alliance said individual member carriers do not generate enough traffic at certain airports to warrant individual lounges. Therefore, "Star Alliance lounges will benefit those markets where the alliance is not represented by a home carrier," it said when announcing the Zurich facility. The alliance currently is evaluating new lounges in Brussels, Buenos Aires, Los Angeles and Manila.
In Asia, Korean Airlines boosted the number of daily transpacific flights offering sleeper seats in premium first. The carrier now offers the fully flat beds on two flights from both New York and Los Angeles to Seoul and on one flight from Chicago to Seoul. Cathay Pacific's first and business class customers now are provided with Compaq iPAQ pocket PCs on flights to Hong Kong from Los Angeles, New York, San Francisco, Toronto and Vancouver. The carrier said the popularity of mobile computing will encourage premium class bookings and that the promotion, which runs through Nov. 15, will combine with a concurrent American AAdvantage mileage bonus promotion to "boost sales revenues during the fall season."
Back stateside, United Airlines last month completed installations of the United First Suite throughout its international fleet of Boeing 747s and 777s. Now, all 91 of the aircraft feature the enhanced cabin, which offers first class passengers a flat bed, 78-inch pitch and other inflight amenities. Northwest Airlines in January will begin installing first class sleeper seats on its 747 fleet.
Meanwhile, the most premium of all commercial airline products, the Concorde, soon could be back in the skies and ferrying travelers across the Atlantic in under four hours. Both Air France and British Airways have completed initial testing and expect their supersonic jets to resume service into New York JFK in October.