For decades airplanes have been divided roughly in two, with
the have-nots sitting in coach and the haves in first or business. Now, there
is an emerging middle class on U.S. airlines. Going by many names—Economy
Comfort on Delta, Main Cabin Extra on American and Economy Plus on
United/Continental—these premium-economy seats are situated in the forward part
of the economy cabin, offer a few more inches of seat pitch than standard
economy and provide some additional perks like early boarding. Predictably,
they come at price points above the average coach seat, and often are made
available first to elite-level frequent flyers. The new category also raises
policy questions for travel managers and presents new buying opportunities.
When United became the first major U.S. carrier to bet on
premium economy, "it really started out as an enhancement for their elite
travelers," said director of the TCG Consulting air practice Barry Rogers.
"Over time, they realized there was a lot of revenue opportunity, so they've
taken that."
Other airlines followed suit.
American Airlines in March revealed plans by September 2013
to install Main Cabin Extra on the "vast majority" of its domestic
and international aircraft. Delta by early June had extended Economy Comfort
seats to its entire mainline fleet and 250 regional jets. United expanded its
premium-economy product to flights previously operated by Continental.
US Airways is an outlier. "We're open to thinking about
economy plus," president Scott Kirby said in March, "but [there are]
no immediate plans to change."
While U.S. carriers offer complimentary premium-economy
seating to elite frequent flyers and some full-fare economy ticketholders,
based on availability, other economy passengers can pay for an upgrade.
There increasingly are options to purchase those upgrades in
corporate booking channels. Delta recently vowed to sell its product through
Travelport-connected agencies, and this week said it would offer Economy Comfort through Amadeus.
United plans to bring its product back into GDSs "some time in the third
quarter" following the disruption of sales due to a reservations system
cutover, according to a spokesman. AA, however, is committed to selling its
option exclusively through direct channels.
Bane Or Blessing?
Premium economy forces buyers to ask if it's a temptation
for their travelers or a savings opportunity—or both. "We have some
customers that are trading down [from premium classes] because of the cost
savings," said CWT Solutions Group senior director Joel Wartgow. "Are
they also incurring additional cost because of [economy-class] travelers
trading up, or are travelers using their own money?"
Rogers said emerging premium-economy options on U.S.
carriers differ from what he called "real premium economy" on such
international carriers as British Airways, Air France, Japan Airlines and All
Nippon, "where it's really a significantly different seat, different
service and a different booking class for it," he said. As for the U.S. take
on premium economy, Rogers said, "These are still economy-class tickets
for U.S. carriers. There are some policies regarding whether a company will pay
for the upgrades if you don't have status. By and large, most companies are
not. Their policy is economy."
Yet, Wartgow suggested that this mid-tier seating option
could prompt a mid-tier policy option. "You could set short-haul at
economy; mid-haul at premium economy and long-haul at business," he
suggested. "There is some demand there and premium economy becomes a good
fit for them."
Just as policy considerations are emerging, so too are
negotiating opportunities. "This is something that a few years ago wasn't
as prevalent when we were contacting with carriers," said Wartgow. "We
anticipate it's going to become more prevalent, because it's going to be widely
offered on carriers and it's an alternative way to control some of those costs."
This report
originally appeared in the August 2012 issue of Travel Procurement.