APEX Insight: Many airlines have avoided adding a premium economy cabin over the years because of the trickiness in identifying the right market, product and price point to up-sell economy-class customers without down-selling business-class passengers. But airlines are beginning to appreciate the competitive benefits of the middle cabin class.
By staying true to the original premium economy product formula Virgin Atlantic first got right – offering recliner seats and adding service enhancements, while enforcing the benefits of business and first class – airlines are able to sell up, not back. Several airlines, including American Airlines, Air Canada, JAL, Lufthansa, Singapore Airlines and Virgin Australia have now introduced attractive options for the middle class flyer.
A brief history of premium economy
To understand why premium economy is appealing to airlines today, we should look at what made it appealing to the airline which first introduced it in 1992. Flying transatlantic, without a cabin marketed as first class, was an important differentiator for Virgin Atlantic’s unconventional and modern brand. Virgin ignored conventional cabin labels and marketed its premium cabin as upper class, which sounded posh, but not as stuffy as first.
The airline then introduced a third class, called premium economy, to encourage customers who fell somewhere between economy and upper class to buy up to a better flight experience, while remaining budget savvy. It was an easier sell for junior executives – both the name and the fare looked good on expense reports.
Airlines offering three cabin classes – economy, business and first – weren’t sure how to respond. Why give up higher fare business class floor area for lower fare premium economy? If flyers had a fourth option, what would make them buy up to business-class cabins?
British Airways was bold. It took the competition head-on by introducing a four class cabin for the first time in aviation history, called World Traveller Plus. But British Airways didn’t end the competition there. It brought beds to business class in 2000, after introducing the world’s first sleeper suite to first class in 1995. This ensured that premium passengers had a good incentive to buy forward.
Redefining the business traveler
The accelerated leap frogging of business and first cabin products over the past 20 years has created a rift between the front of the plane and the back of the plane which never existed before. On airlines that do not offer premium economy seating, business travelers whose budgets or travel policies won’t allow for a business-class ticket are left with no alternative but to fly coach.
As Jennifer Coutts Clay, aircraft interiors expert and author of Jetliner Cabins, explains:
“Business travelers who have paid the full economy-class fare no longer want to sit alongside passengers who may have paid only a fraction of that amount. In particular, harried executives try to avoid those leisure passengers for whom the flight itself might be a kind of party experience. With this new mix of traffic, the task now facing the airlines is how best to manage the future of the economy-class cabin, because this has become a key industry battlefield.”
“Business travelers who have paid the full economy-class fare no longer want to sit alongside passengers who may have paid only a fraction of that amount.” – Jennifer Coutts Clay, author of Jetliner Cabins
The business-class passenger is no longer a cookie-cutter suit and tie wearing executive. The growth of the freelance economy has given rise to an entrepreneur class, as FutureBrand’s global chairman, Chris Nurko, has pointed out. A growing number of passengers, including upscale leisure travelers and the “silver surfer” class, hunger for more than economy, without having to pay for business class. Qantas’ AWOL website targeted at millennials calls premium economy “the business class for under 30s”. This once much-feared cabin class is finally ready to take off.
Now we recline comfortably in the middle cabin, and watch this tricky space.