First class and coach fares are not fixed by any means, and are dependent on distance, demand, time of year, and time of day.
Covid has taught passengers to pay for a little more space, especially to sit at the front of the aircraft which is relatively wider. That means many of the seats are occupied, and it is challenging for the loyal customers to get a free upgrade to the front of the aircraft.
The number of people with elite status that fly frequently is only increasing from the airport lounge to the first boarding group, which means more people to compete with for those seats. Even greater crowds are expected during the year-end holiday period which airlines forecast to be another record one.
In fact, even during the early part of 2025 which is considered as the off-peak season, executives have been expecting high demand. The Cirium data shows that the capacity offered by U.S. airlines in the first quarter will be 1% more than it was a year ago.
“We are probably generating our highest unit revenues on the transatlantic [routes], let’s say in the middle of the winter,” Delta Air Lines President Glen Hauenstein said during an investor day in November.
The cost of first class and coach is not the same, but depends on the distance, the number of travelers, season and time of day. For instance, a round-trip ticket on United Airlines from Newark New Jersey to Los Angeles International Airport in the first week of February was $ 347 in standard economy and $ 1791 in the Polaris cabin, which offers lie-flat seats but not the international business class lounge.
The round-trip flight of American Airlines from New York to Paris during the Easter week of the year 2025 was $1,104 in economy class and $3,038 in Flagship Business class.
The tens of billions of dollars of revenue that sustains airline companies is at stake. Loyalty programs are a gold mine for airlines and the trick is to get the right balance between freebies such as free upgrades and the almighty dollar.
In recent years, the requirements for earning status have been adjusted, and spending rather than the distance traveled is now valued. They have also increased the thresholds that flyers need to spend to be awarded elite status. To earn status, customers will have to spend more on United next year. But on Thursday, American said it would maintain its requirements the same for the next earning year starting in March.
From Giveaways To Paying Up
Some 15 years ago, passengers were willing to pay for seats in only 12% of Delta’s domestic first class. Now, that is closing in on 75% and rising, Hauenstein said to investors last month.
“We gave them away based on a frequent flyer system,” Hauenstein said about first-class seats in 2010 and earlier. The rationale for the exercise was to spend as least as possible, fly as long as possible and be upgraded as much as possible. That led to a position where our most valued products were the biggest loss leaders.”
That, he said, has now been reversed for Delta as more money is being spent on the front of the cabin. The carrier derives 43 percent of its operating income from main cabin economy tickets, compared to 60 percent in 2010.
It’s a trend that is extending across the industry from the most profitable carrier, Delta, to the discounters such as Frontier Airlines that plans to add more space first-class seats at the front of its Airbus in 2025. On Wednesday JetBlue Airways announced it will add two or three rows of domestic business class on planes that will not have Mint business class with lie-flat seats, but will be called “junior Mint.”
A day earlier, Alaska Airlines revealed plans to retrofit some of its planes with premium seats as it prepares for new international flights after acquiring Hawaiian Airlines earlier this year, with revenue from the higher price seats surpassing standard economy.
“You see the Airbus 330s and the Boeing 787s are under-indexed in business class and lack an international premium economy cabin,” Andrew Harrison, Alaska’s commercial chief, said at an investor day in New York on Tuesday.
Bigger Business
Carriers are now striving to include first class area or larger international business class with larger displays and doors to the flat beds.
“It is interesting that we have more paid demand for premium cabin than we had before the pandemic,” said Scott Chandler, the vice president of revenue management at American Airlines. “There are more customers who would prefer to have the taste of the premium cabin.”
Chandler stated that American has been over the past few years trying to make it easier for customers to purchase up to higher cabins, with options to upgrade to first class or other cabin classes such as premium economy after purchase.
American is going to add more premium seats on some of its longer range aircraft as it and other carriers do away with first class on some planes to add larger international business class cabins that will feature new seats with sliding doors. Delta and United have also raised their stakes in their premium segment products to meet the demand from consumers willing to pay for such services.
‘They are doing all they can do to make you buy their high end products. That’s absolutely what they should do,” said Henry Harteveldt, founder of travel consulting firm Atmosphere Research Group. Consumers do not go to a supermarket and buy a store brand product and then the sales person is expected to scan that product and give you a designer bag for free.
