Passengers opting for more airline frills push carrier profits up
Passengers opting for more airline frills push carrier profits up
Delta Air Lines reported strong earnings Thursday morning. Its profits rose 60% in the third quarter, buoyed by still-strong demand for travel.
The airline says its premium products — tickets that come with perks like seat selection and a little extra legroom — are driving that growth. Sales of those tickets, plus business and first class, were up 17% year-over-year compared to just 12% in the main cabin.
And Delta isn’t the only airline betting that customers will shell out for an upgrade.
For a long time, most airlines’ strategy was to jam as many people as possible into the main cabin and charge a premium for anything above coach, said David Slotnick with the travel site The Points Guy.
“Those used to be priced exorbitantly. They were really for passengers who didn’t care about price,” Slotnick said.
But the pandemic changed that.
As restrictions started to ease, Slotnick said people were ready to travel again but still COVID-cautious. Plus they had some extra savings.
So, they were willing to pay for more space from their fellow passengers.
“And they realized ‘Oh, this is actually kind of nice. I should do this more often,'” Slotnick said.
He said airlines noticed this growing market for something between coach and business class. And after some tinkering, they seem to have figured out what travelers are willing to pay for premium economy seats.
“And, I mean, the airlines are doubling down on it and it’s just been a resounding success for them,” Slotnick said.
So, what’s in it for us when we shell out for the upgrade?
“You’re getting a quilted plush seat. You’re getting free alcoholic beverages if you’re over 21. Really nice amenity kits, memory foam pillows,” said Sally French, who follows the travel industry for NerdWallet.
She said the post-lockdown revenge traveler wants to feel a little spoiled while they fly.
But another driver of premium-economy sales is that the floor has moved, said travel analyst Lindsey Roeschke with Morning Consult.
“The basic economy has become incredibly bare bones,” Roeschke said.
Carry-on luggage only. You don’t get to choose your seat.
“You’ve got people who are kind of more mainstream travelers who are looking at that and saying actually, it makes more sense financially for me to trade up,” Roeschke said.
In some ways, Roeschke said, today’s premium economy is yesterday’s standard.
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