Airlines in recent years significantly have grown and diversified the share of premium seating capacity in their fleets, in particularly developing of premium economy cabins. In terms of addressing this new availability in travel policies, however, many buyers remain in the early stages.
Delta Air Lines counted less than 10 percent of its total seat count as premium about a decade ago, and any given aircraft at that time had at most one type of premium seating option: either First or Delta One, according to a Delta spokesperson. Today, premium seats account for 28 percent of Delta’s total seats, as its options have expanded to include Delta Comfort Plus, Delta One Suites and Delta Premium Select.
In the fourth quarter of 2019, Delta’s revenue from premium products was up 9 percent year over year to $15 billion as the carrier has "continued to improve and invest in the premium experience," Delta president Glen Hauenstein said in an earnings call.
United Airlines expects that 90 percent of its widebody jets will have Polaris seating by the end of the year, including all Boeing 777s and 767-300s. United also has begun selling its Premium Plus seating on select flights between New York and both Los Angeles and San Francisco. United is on track to have about 14,000 combined Polaris and Premium Plus seats by the end of 2020, along with the nearly 59,000 Economy Plus extra legroom seats it already has, according to a spokesperson. Transatlantic routes will be a particular focus in adding business class capacity, with seating expected to be up almost 20 percent year over year over the first half of 2020, chief commercial officer Andrew Nocella said in a recent earnings call.
"We in the past had undersized business class cabins in key business markets like London Heathrow and Switzerland while offering too many economy cabin seats," Nocella said. "We’re now rightsizing the size of our premium cabins."
American Airlines has been building up its Premium Economy availability as well. It has 3,025 seats in the class available and will have 3,361 by year-end, a spokesperson said. CFO Derek Kerr in an earnings call said the product "continues to do well" and that average fares are running about 2.3 times the average economy fare.
Alaska Airlines reported that its First Class seating was up 13.6 percent year over year in the fourth quarter, and the carrier has been growing its Premium Class—which offers extra legroom, complimentary alcoholic beverage and priority boarding—as well.
JetBlue, too, plans to expand availability of its premium Mint seating on transcontinental routes this year, president Joanna Geraghty said.
The growth of premium economy is occurring globally as well. Latam, for example, last month announced that it will have Premium Economy seating—which offers a designated overhead space, a blocked-out middle seat and such perks as complimentary drinks—across all of its short- and medium-haul flights as of March 16.
As with other premium products, corporate travelers are a key target for premium economy use. With many companies still under tightened premium class policies that became common following the 2008 economic downturn, it’s easy to position premium economy as a cost-effective way to improve the traveler experience, particularly on transcontinental or medium-haul international flights.
Actual booking numbers to date show that move is happening "steadily by slowly," Advito global air practice director Ryan Hohag said. While premium economy ticketing was up among Advito’s clients year over year last year, it still accounts for only 2 percent of total air spending and 1 percent of tickets. Hohag said he expects to see those numbers start to pick up later this year into next year.
At this point, the bigger demand is for analysis of the potential impact of policy changes, including the potential benefits on employee morale and traveler productivity should premium economy be added as an option, he said. The feasibility would depend on a company’s travel footprint and its ability to customize policies based on routes and geographies in which premium economy is available.
"We do have some customers who have fully embraced premium economy in their travel program, and for those customers, carriers are getting more competitive with premium economy pricing, offering discounts across more fare classes," Hohag said. "Most are still in the discovery phase."
That request for analysis in some cases includes looking at moving business class travel to premium economy travel, though carrier executives have repeatedly said that buying up, not buying down, is the predominant direction for premium economy customers.
"Customers rely on our Premium Economy offering to elevate legacy Economy class travel policies," American Airlines SVP of global sales and distribution Alison Taylor said. "We’ve ... seen migration from Economy class to Premium Economy by accounts primarily within the IT industry."
A Delta spokesperson said 10 percent of Delta’s corporate accounts have Delta Comfort Plus in their booking policy, and 81 percent have any premium product in their policy.
State of Display
As they diversify premium offerings, carriers are pushing new standards in display, via ATPCO’s Next Generation Storefront initiative, which groups similar products in columns. That also could ultimately change the way buyers look at premium-class policies, according to Danny Finkel, VP of booking experience and supplier strategy at TripActions, one of the early adopters of the display.
"With pricing becoming more and more dynamic, there are often times where premium cabin pricing, including premium economy, is not much more, if not even cheaper, than economy, but would be completely lost in most legacy search displays," Finkel said. "Full-content displays allow these deals to be surfaced."
Regardless of policy, however, airlines are adding ways to enable business travelers to get them on their own dime when their policy forbids it. Delta, for example, has built in the ability for travelers to purchase upgrades with a second form of personal payment, so they can get an upgrade and remain in policy.