Airlines Attract Premium Travel W/ Enhanced Products

<B> Airlines Attract Premium Travel W/ Enhanced Products</B>

By David Jonas

Despite an overriding focus on cost savings--including more restrictions on usage of first and business classes--many carriers are enhancing their premium product offerings in an effort to attract and retain high yield customers. In doing so, the comfort gap between higher contribution customers and economy flyers continues to widen, mirroring the increasing differential between business and leisure fares.

"Airlines are after people paying the higher fare," said Michael Boyd, president of the Boyd Group, Evergreen, Colo. "They are no longer interested in more passengers, but strictly more revenue." However, if you manage to get yourself up front, expect more luxury and increased productivity as the airlines sink millions into premium projects.

Those projects include first class enhancements, such as flying beds, as well as business class improvements. Meanwhile, carriers that took a little from each to create hybrid business/first class cabins continue to stress the convenience to business travelers and the value to those purchasing the tickets.

Among the most popular of the recent developments is the addition of electronically controlled sleeper seats in international first class. American and United, following the lead of various foreign carriers, raced this spring to become the first U.S. airline to offer such an amenity. Now citing immense popularity, both carriers are deploying the seats on more aircraft and to more destinations.

American currently offers fully reclinable comfort on B777 service between Dallas/Ft. Worth and London Gatwick. It will equip at least 10 more 777s by year-end.

By next summer, several of AA's B767s also will offer the seats. By that point, first class travelers will be able to completely stretch out and lie flat on transatlantic, transpacific and South American routes. American's new sleepers are part of a massive $400 million project to upgrade cabin interiors throughout its fleet.

For its part, United developed United First Suite. The international first class product, including sleeper seats and an array of inflight and airport amenities, will be rolled out to 20 B777s and B747s by year-end, with the remainder of the international fleet to follow. The seats are arranged in herringbone pattern for greater privacy and aisle access.

On the ground, United First Suite passengers benefit from separate checkin positions and special concierge services.

On the international front, Swissair this fall will become the latest to furnish its first class cabins with sleepers. The first planes will offer the seats by November, with the remainder of the MD-11 and A330 fleets equipped by March. According to Swissair, each set will include "the largest tray in the industry," which can serve as a work surface or a table to accommodate two passengers dining together.

Several international carriers also have sleeper seats, including Air France and British Airways--the pioneers of the concept--and Korean Airlines, Qantas and Singapore.

Of course, first class is not only about the seats. For example, TWA, which said it has no plans for sleeper seats because it acknowledged it is no longer a premier transatlantic carrier, has instead expanded first class seating by 60 percent and created a new upgrade program. Dubbed First Up, the program grants first class upgrades, based on availability, to passengers paying full coach and either connect through St. Louis or fly from New York JFK.

The carrier has said the program has boosted first class load factors and offers another option when negotiating contracts.

For US Airways, first class is an entirely new development for international service. The carrier's current international fleet offers only business and economy classes, but new Airbus 330 aircraft also will include a first class cabin. The new planes are scheduled for delivery early next year. US Airways said the introduction of a first class cabin is in response to customer demand in the international markets it serves.

Meanwhile, a few carriers are modernizing personal entertainment systems in the front cabin, such as American, which claims it will offer the first inflight DVD players. That advancement, including a movie library of up to 20 DVD discs per passenger, is expected by Sept. 1 on flights between Miami and Buenos Aires. The rollout will expand to other South American and European destinations in the following weeks, then to international business class and eventually to domestic long haul routes.

Singapore Airlines, meanwhile, is in the process of equipping its long haul fleet with a new inflight system featuring on-demand access to 25 movies and 50 audio CDs.

Despite these first class innovations, managed corporate travelers are shying away, opting or under mandate to book lower cost seats. "This is an example of the airlines' usual inept way of responding late to the marketplace," said Phil Dunphy, travel manager at New York-based Pfizer Inc. "These changes six or seven years ago would have been ideal, but now the market has changed and corporations are tightening up a little bit."

Instead, travel managers are saying that the current business products are sufficient for their travelers and are offered at a substantiated price. Indeed, Continental, Delta, TWA and Virgin Atlantic all report healthy load factors in their hybrid first/business class cabins.

Boyd said these airlines are back to where they were 10 years ago when business people paid just a little extra for a better product. Because first class fares have become so prohibitive that normal business travelers cannot pay for it, "some airlines have moved away from the three-class configuration and created a de facto first class," Boyd said. "These products are doing well and offer a higher class of service for all those people who want to upgrade."

Delta's BusinessElite is the newest of the bunch and already is eliciting rave reviews from the carrier's passengers. First announced last fall, the merged class is now available on all routes to Europe, Japan, India and Brazil. The new electronic, ergonomic seats are available throughout most of the international fleet, with complete rollouts on all Delta B767s, MD-11s and B777s expected soon.

Continental's BusinessFirst also continues to perform well. "The fact that others are trying to emulate us certainly says something," said a spokesperson. The carrier reported growing load factors to Asia, as well as an increase in corporate agreements that include transpacific travel, partially attributable to the popularity of BusinessFirst. The product also sells very well to both Latin America and Europe.

Meanwhile, Virgin Atlantic, credited with developing the original "first class product at a business class price," is again raising the bar in its Upper Class cabin. It is introducing its own sleeper seats, both the traditional single bed and an industry first double bed. The single seat sleepers will be installed on the Virgin fleet beginning at the end of the year. The double version will debut sometime next year. In addition, inflight bars will be expanded to seat seven passengers and a dedicated treatment area will offer massages and beauty therapy.

Virgin's enhanced business class will be rolled out to the entire fleet by the end of next year, including new daily Chicago-London flights beginning this fall. A spokesperson said the carrier is targeting an increase in corporate contracts that include Upper Class, though it is too early to see the positive effects of the redesigned cabin.

According to TWA, its premium business product, Trans World One, also remains strong. Recent enhancements include new personal touch-screen entertainment units and an expanded menu.

Of those still offering a business class product at a business class price, British Airways, battling Virgin for high contribution passengers, is introducing fully flat beds. Other enhancements to BA's international business class cabin include upgraded entertainment systems and fax, modem and laptop power hookups. The carrier said this "lounge in the sky project is part of a master plan to increase the number of business passengers flying with the airline." Indeed, BA is looking to reverse the trend of a declining number of business travelers with additional refurbishment to its first class and short haul business class products.