Growth in the Premium Economy market is an area most airlines and analysts alike are keen on. Solid yields and happy customers are things which are hard for anyone to complain about. So why is Cathay Pacific cutting back on the product in certain markets? Turns out it isn’t 100% perfect after all.
The company is halting the rollout of Premium Economy on their A330 fleet, splitting it to have some aircraft with the product and some without. For those planes keeping it a row will be removed and two rows of economy seats will be put in. The first plane with this configuration has already rejoined the fleet; the rest will be converted over the next 12 months. The reason cited for the change to the existing planes should come as no surprise: The economics of it make sense to the airline. Cathay Pacific is restricted in the number of flights it can operate daily into Brisbane, Melbourne, Sydney & Perth and they’ve maxed out on those slots.
Adding the 9 extra seats might not seem like a huge deal but it translates into more than 600 extra seats weekly which can be sold in the market. And the carrier has indicated that they are seeing the stronger economy cabin demand for those flights. Turns out that the ~9 hour flight times are short enough that many passengers seem less inclined to splurge for the additional personal space. It could be worse for those passengers, however. There will soon be a regional fleet of 10 aircraft without the Premium Economy cabin at all. These planes will operate on even regional routes where the demand for extra personal space is lowered by the shorter stage length.
But Cathay is not at all giving up on the Premium Economy market; it has announced intentions to install an upgraded version on their A350s, though the changes will not trickle down to the versions already deployed. At the same time the company has committed to upgrading its existing business class seats to the new version across their A330 and 777 longhaul fleets. Why the discrepancy in behavior for the two cabins? Seems that the customers seeking out Business Class truly want the most up-to-date product (and are often willing to have their employers pay for it) while the Premium Economy cabin is folks on their own dime looking for something just a bit better than steerage. And the competition in that space isn’t nearly as fierce; the market is still evolving and there are far fewer “standards” as to what is acceptable or worth paying extra for.
Premium Economy will continue to expand, generally speaking. But the airlines are getting smarter about defining the markets where they offer it and understanding the markets where it sells well. And, where pressed for additional seats in a market, they’ve mostly learned to not cannibalize the business class cabins for the sake of premium economy. First class, on the other hand….
- Lufthansa cutting first class cabin on some routes
- Lamenting the proliferation of flat-bed business class
- Some thoughts on Lufthansa’s Premium Economy announcement
- On board the new American Airlines A321T
- In-flight: British Airways A380 inaugural LHR-LAX
- JetBlue Mint introduced to the premium transcon market
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Why do you think are the US carriers so reluctant to add a premium economy section on their long haul flights?
Because they’ve already added extra legroom options and people are willing to pay for that. Also because they have fewer flights in the 10+ hours range which is where the value proposition starts to become much better.
People aren’t willing to pay the differential for the square footage for the increase soft and hard product.
Premium plus needs a nominal 34% increase which means to break even a $1000 economy fare needs to be a $1,340 premium fare; a $2,000 needs to be $2,680. If I might consider an increase of $340, $680 will make me fly with someone else with a $2,100 fare.
If they can rip out one row of premium and put in two of economy Cathay really sacrificed real estate in their original design pushing the 34% number up.
United loses money even with E+. Now it cost around 2 CPM on the flights I make (TPACs) and it doesn’t track with coach fare price. Same city pairs will vary 8 to 23 CPM but the premium for E+ stays the same.
Premium economy for me isn’t enough. On 10 to 14 hour flights I was not comfortable enough with the barcalongers (sp) on United to pay for business. They were more comfortable but not comfortable enough for the price increase. With lie flat I can sleep. I get rest. The flight seems much shorter. I’ll pay more for that. I don’t think I can sleep as much on Cathay’s premium seat and won’t pay what they need to charge to make it as profitable as coach is for them.
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