Airlines

WSJ DataViz: Premium Economy – Why This Plane Seat is the Most Profitable

Paying Up for Space

Airlines Charge Thousands Extra for a Few Inches of Legroom on Long Flights

For most fliers, the ideal seat on a flight is usually in first or business class. However, for airlines, the sweet spot on long-haul flights is, increasingly, farther back in the plane.

A new hybrid class, called premium economy, is appearing on more planes due to its attractive economics. The seats generally give passengers a bit more space than traditional coach and often come with extra amenities like better food. Tickets are pricier than for basic economy, but still much cheaper than flying up front.

For carriers, the whole package costs much less than business class. That means they only need to spend a bit extra to generate higher fares than tourist class and can still pack in seats. Airline executives say it can be the most profitable cabin.

Paying Up for Space - Lufthansa

The favorable equation is part of what prompted  Deutsche Lufthansa AG  to start rolling out a new premium economy section on all intercontinental flights as of this coming October.

Airlines, like passengers, fret about space. Fliers want as much elbow and knee room as possible, while carriers want to make optimal use of each square foot. Lufthansa’s new seat gives passengers up to seven extra inches to stretch their legs, and four more inches at shoulder-height because each row has two fewer seats than in traditional economy class. There are no shared arm rests.

Lufthansa’s new seat takes up about 50% more floorspace than a traditional economy seat.

A round-trip premium economy ticket will average €600 ($824) more than basic economy. Business-class seats, meanwhile, use three times the area of standard economy seats and round-trip fares are €2,000 higher on average.

The trend has gathered speed due to widening differences between the front and back of international airliners. Over the past 15 years, most global carriers have upgraded their business cabins with seats that spread out into flat beds. These are so luxurious that most airlines have ditched first class.

To make room for these loungers, airlines have squeezed coach class. First they compressed rows by shaving knee space. Now many are wedging an extra seat into each row, although Lufthansa has no plans to do that.

The German carrier considered introducing premium economy twice before and its hesitation shows the cabin’s potential downside. Airlines want economy fliers to buy pricier seats, rather than business travelers opting for cheaper ones. Only after Lufthansa in 2012 began upgrading its business class to horizontal beds from slanted ones was it confident of not cannibalizing its own premium traffic.

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Source: Daniel Michaels, Why This Plane Seat Is the Most Profitable, March 4, 2014, http://online.wsj.com/news/articles/SB10001424052702304585004579418992081321538?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702304585004579418992081321538.html.

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