Even if the omicron variant of Covid-19extends the timeline for business- travel recovery, some airlines are betting that leisure flyers will continue to purchase premium-seat products.
The president of Delta said that the company has created a new class of customer, which is high-end consumers, who want products that they might not have access to if they were given to the business customer earlier in the booking process.
Premium revenue for Delta's domestic and short-haul Latin market flights was higher than the main cabin revenue, with the percentage of seats that were sold in first-class cabins and for Delta's coach cabin extra legroom offering, called Comfort+, being higher.
Business traffic at the airline remained down from the previous year.
The big revelation for us was that there's a bigger demand for this than just business travelers. He said that Delta could announce an expansion of its premium offerings during its Investor Day event.
The carrier will be alone if it makes such a move. The company announced last month that it will retrofit 52 of its existing A380s and 53 of its existing Boeing 777s with premium economy cabins by the end of 2022. The premium economy cabin class will only be on six planes by the end of the year.
"Emirates is investing in this retrofit program to ensure that we continue to serve our customers' needs and provide the best experiences in the sky," Tim Clark said at the time of the announcement.
Delta has a premium cabin. The photo is courtesy of Delta Air Lines.
The popularity of premium products among leisure travelers has helped United and American.
In October, Andrew Nocella, United's chief commercial officer, said the carrier has been selling first-class and Economy Plus extra legroom seats with higher load factors than in the past. The premium leisure demand surge must still be proven, but Nocella is bullish.
"In the unlikely event corporate demand is not 100%, we do have other levers to push, and this one has become increasingly obvious over the last three months as an opportunity to do something a little bit different and get some more revenue on board the aircraft," Nocella said.
The demand surge has extended to American as well, though the chief revenue officer has expressed less certainty about whether the change is structural or temporary.
Urban hotels embrace leisure with business travel lagging.
What is behind the surge?
There are a variety of factors that have fueled the premium leisure surge. It's obvious that during the Pandemic, the stock and real estate markets exploded, and that resulted in increased savings for higher income families.
John Heimlich, chief economist for Airlines for America, said that household wealth needed a place to go and that the Pandemic scare has changed the mindset of many individuals.
He said that it made people think about living large and having memorable experiences.
The availability of premium airline products has increased as the network U.S. airlines deployed widebodies with lie-flat business-class offerings and premium economy cabins more widely on domestic routes.
Premium seat availability for the leisure market has been boosted by the lack of business travelers, while premium seat paid load factors have benefited from fewer business travelers being in the air to accept free upgrades.
The shift in premium seat supply has brought down prices relative to economy seats, according to an October analysis done by the Expedia Group and the ARC. Premium tickets were more expensive than economy tickets in 2021, but they were less expensive than in 2019.
Premium seat demand was fueled by the lower price gaps and the desire for extra space, according to Julie Kyse, the vice president of global air partnerships.
The trend toward premium leisure flying is still to be determined, and how it will impact airplane configurations is still to be determined.
Kyse believes that airlines will invest more in premium economy cabins over time.
Craig Foster is a co-founder of Valour Consultancy, which focuses on the commercial aviation and maritime markets.
cabins may be changed to meet the demand for larger premium economy cabins to meet the premium leisure demand," Foster said.
