Who do you know that would call the proliferation of flat beds in business class "an unfortunate development?" Can’t think of anyone? Maybe you should hang out with airline CEOs a bit more. Christoph Franz, CEO of the Lufthansa Group, said just that recently, suggesting that it is likely bad for the industry.
In many ways Franz is correct. Flying the same plane with fewer seats makes it harder to be profitable. And if you cannot drive a premium yield for those fares it is even more challenging. That financial aspect has a lot to do with why the Lufthansa Group carriers have been among the slowest to adopt such a seating plan. Swiss got things done reasonably quickly, and with a pretty impressive product while Lufthansa, LOT and Austrian were rather slower to the punch. Austrian is done now and LOT is putting the new seats on their 787s. Lufthansa only has the flat beds on their 748i planes and a few A330s; even the new A380s were delivered without (though Franz claims that was due to manufacturer backlogs and certification issues).
The good news out of all of this is that, with the exception of Turkish Airlines, the premium economy seating option is growing. When business becomes better than what first was and first shrinks away – both of which are definitely happening – then there will be demand for a slightly improved experience at a slight premium price point. And economy is definitely not getting any better, so there will be some customers who will pay that premium.
It is a balancing act, making sure that there are products to serve all the markets which present sufficient demand. And tracking those shifts is a challenge. But it is definitely happening. That doesn’t mean it is necessarily bad for the airlines, just that they have to adjust.
The harder question to answer is whether it is good or bad for passengers. Part of me says it is good as a better product in business or premium economy is a nice improvement at an arguably lower price point. The bad part, however, is that the regular economy product is getting worse, at least in terms of space afforded the passengers. And the part where the overwhelming majority of customers travel in economy means that more are affected by the downgrades there than benefit from the upgrades in the forward cabins. Yes, the IFE is generally better now (throughout the plane, including coach) but seat width and pitch are generally down. Which of those is more important? Which makes for a more a better passenger experience?
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