shutterstock_295476128How will you feel if one day your company asks you to fly in economy class instead of business class on flights less than eight hours?

When that happened to me, I was an international road warrior and I couldn't swallow it. When I complained, I was told, “Oh, but you can fly in premium economy.” “Great,” I said, knowing that most airlines didn't offer premium economy then. (I was an airline consultant, after all.) Although I tried to buy as many tickets as possible on the few that did offer premium economy, I found myself stuck with an economy seat numerous times.

After the last economic crisis, my previous company followed many other corporations that amended their travel policies to exclude first class and limit business-class tickets. Since corporate accounts generate more than half of their revenue, several airlines started reconfiguring their aircrafts by removing bulky first-class seats and improving their business-class product. And a handful of them introduced a premium-economy cabin on long-haul flights for fliers who are willing to pay for the added comfort and convenience but are not about to drop large sums of money for a business-class seat.

Is this new option for fliers appealing enough for premium economy to be a viable product in the market, or is it just an advertising scheme that will soon phase away? What makes the premium economy class appealing? The major benefit of this option, of course, is the comfort of a bigger seat. 

Premium economy made its first appearance as a flight service through Virgin Atlantic in 1992. Virgin Atlantic continues to lead the race for the best premium economy class through strategies such as offering one of the longest seat pitches, a plated meal service inspired by business class, a separate crew trained in premium services, and several other attractive amenities. Fifteen other airlines have since reconfigured their wide-body aircrafts to include a premium economy cabin, and a few more are considering introducing it. They are all offering a modestly priced option between the often crammed standard economy and the more expensive and luxurious business class. All of these airlines have one common goal: to maximize profits by capturing the demand.

Premium economy benefits not only the travelers, but also the airlines. This new flight service has created a less expensive option for businesses to fly their employees and clientele. The travelers benefit by getting an upgrade from standard economy and the businesses no longer have to shell out large sums of money for expensive business-class seats.

The addition of this category of seating brings along a wave of additional revenue to the airlines from companies that are willing to spend the extra dollars on premium economy. Affluent leisure travelers, people with special mobility needs, and adventurous individuals who seek different experiences also belong to the premium-economy market segment. They will pay a small premium for additional comfort and a better product.  The markup on a premium economy cabin, relative to an economy cabin, typically ranges from 50 to 120% while the price difference of a business-class ticket relative to premium economy spreads from 100 to 300%.

Will premium economy be a lasting option for airlines? My vote is that premium economy is here to stay. I don’t believe that corporations will reinstate their more generous travel policies. Plus, demand for more comfort and convenience will always exist, and the price for this service is appealing. It’s likely that, in the upcoming years, more airlines will reconfigure their aircrafts to include a fixed premium-economy cabin or a flexible business/premium economy section using convertible seats. The question is, how many seats should the premium-economy cabin have in order to be profitable and not dilute the business cabin revenue?

What’s your vote? Is premium economy here to stay, or will it fade away? Please share your answer in the comments section.

Topics: Airlines, premium economy, Virgin Atlantic, Marios Prokopiou, business class