In 2020, airlines had to recalibrate and turn to new playbooks to get out of the crisis. Delta Air Lines, which has been on a quest to be known as a premium airline in the marketplace, saw premium cabin revenues come back stronger during the crisis. At the same time, American Airlines saw its position strengthened with strong premium cabin revenues coming in ahead of the airline’s economy cabins.
American Airlines on premium cabins
Speaking at the 2021 Wolfe Research Global Transportation & Industrials Conference, Vasu Raja, Chief Revenue Officer at American, stated the following on the airline’s premium revenues:
“Things we’ve been really encouraged by actually, as the crisis unfolded, is that premium revenues have held up much greater than what we have anticipated. If economy revenues are down 50% to 60%, premium revenues in the domestic system are at half of that, and we’re able to go and generate traffic.”
American was also encouraged by signs where customers purchased an economy ticket and then upgraded to a premium cabin. In terms of a reason why this happened, Mr. Raja stated the following:
“We think a good chunk of that might be people seeking out space that comes with the premium cabin up front. So we’ll see how long that lasts. But what’s been similarly encouraging is in long-haul, we’ve seen the same kind of trend. Those long-haul flights that are going right now, their revenue mix might be 60% or 70% from the front cabin.
“Even though we don’t have the big corporate business travelers that are normally book those cabins, there’s a lot more customers that are willing to actually go and pay to sit up there, and that’s the thing that we think is a little more likely to stick around.”
Delta saw similar trends
Following American, President of Delta, Glen Hauenstein, speaking at the same event, stated the following on its premium revenues:
“The premium cabins are everything above Main Cabin. What we see is a recovery in those that is running 10 points ahead of Main Cabin recovery. So if our main cabin is 75% restored, our premium products will be 85% restored. So, that that to us as a real point that our hypothesis that there is demand for premium products for broader perspective than just traditional business customers is valid.”
This rang true even during the crisis, back when Delta was blocking middle seats, according to Mr. Hauenstein. Main Cabin is Delta’s economy product. In the premium space, it offers extra-legroom economy, premium economy, and a business class.
Delta has been focused on positioning itself as a premium leader in the airline space. It wants to be known for its premium products and has invested in bringing its international long-haul fleet up to a higher standard of premium travel. This includes outfitting its Airbus A350-900s with Delta One Suites and upgrading the Boeing 767-400ERs.
Stay informed: Sign up for our daily and weekly aviation news digests.
Who is booking premium cabins?
All airlines have succinctly stated that the large corporate customers who typically book up front are coming back much slower than leisure and smaller business customers. So, the premium cabins are roughly a good mix of leisure travelers willing to buy up and small- and medium-sized business customers that are willing to pay for the premium cabin.
While some segments of the market where people are booking to get some more space, another aspect is fares. Domestic fares have typically run a little behind 2019 levels throughout the pandemic, and some passengers have found incredible deals in a premium cabin.
Looking ahead to summer 2021, those fares have started to vanish, but the customer bases that are booking are still leisure and small- or medium-sized business customers. That shows a willingness to pay a premium, but it is also broadly indicative that more higher-paying consumers are starting to come back.
Once business travel comes back, airlines will likely start to price out some of those newfound customers booking in the premium cabin. Especially on long-haul international flights, the deals to sleep in a lie-flat on the way to Europe will start to evaporate as business-centric customers start to fill up planes to Zurich, Paris, London, Frankfurt, and other top cities.
Nevertheless, American and Delta have seen premium cabins perform well for a variety of reasons. Whether the customers they currently are booking in the cabin continue to book up front is a different story.
Have you flown in a premium cabin during the crisis? Let us know in the comments!