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Delta moves to premium economy as the industry recovers

On the way out of the crisis, airlines were able to gain a lot of new insights into sales and customer booking trends. While some pre-crisis strategies were quickly discarded, others were sped up due to new and perh -s surprising developments. Delta Air Lines, which is seeing some strong sales trends in premium cabins, is betting heavily on a cabin class it only introduced a few years ago: international premium economy.

The Premium Economy is a successful cabin for Delta. Photo: Vincenzo Pace | Easy flying

Premium products have done well

One trend Delta noticed during the crisis was that its premium products were strong performers. In the national and international short-haul markets, for example, Delta’s premium income exceeded income in the economy class by around ten points. Compared to 2019, Delta reported that its paid occupancy factors in economy cabins with extra legroom (called Comfort +) and first class cabins exceeded 2019 levels.

Glen Hauenstein, President of Delta, commented on the airline’s third quarter earnings conference call what this means:

“I think the big realization for us was that there was a much wider demand for it [premium products] than business travelers only, and if we have to switch to demand sets for high-end leisure travelers to fill those spots, we have to compromise. “

The evidence of this is clear in Delta’s financial results. With only 40% of business travel recovered, Delta could still make a profit even without government support. This is a positive result as it gives the airline a well-known presence with premium leisure travelers.

Delta moves to premium economy as the industry recoversDelta is seeing strong demand for premium products – even if most business travelers sit on the sidelines. Photo: Delta Air Lines

Bring this to international routes

On the previous Sunday, Delta made some changes to its transatlantic flight schedules for 2022. One of the key takeaways is that Delta is driving the introduction of premium economy on European routes – something Mr Haunstein said Delta has been working on for some time.

The expansion of the premium economy in Europe has been achieved by retrofitting existing aircraft. The Airbus A330-900neo and A350-900 were newly delivered to the airline with the airline’s new premium economy product called Premium Select. Delta had to convert its Boeing 767 and Airbus A330 fleets to Premium Economy. The long-term goal has always been to retrofit the international fleet with this class.

Delta moves to premium economy as the industry recoversIt wasn’t that long ago that a Delta Widebody with Premium Economy was rarely found. Photo: Getty Images

Previously, it was Delta’s goal to offer Premium Economy to all international wide-body aircraft by 2021. That goal has been delayed due to the crisis, and Delta has even switched its large fleet, retired the Boeing 777s and canceled some 767-300ERs. By next year, however, Delta expects to have retrofitted most of its large-c -acity fleet with the new cabin class.

The reason this class is so important on international routes is because Delta does not offer a premium recreational product in this area. The Premium Economy finds a niche between Economy Class and Business Class with extra legroom. Delta’s cabin, labeled Premium Select, resembles a domestic first-class seat.

Delta moves to premium economy as the industry recoversPremium Select is comparable to a domestic first class and is a significant upgrade from an economy class seat. Photo: Delta Air Lines

The revenue Delta can get in this cabin versus an economy class seat with extra legroom is key. But another factor that can be seen in Delta’s sales surge is that Delta is taking away seats to accommodate that cabin on an airplane. Delta has not reduced the number of business class seats it flies on a wide-body aircraft, but it has reduced the economy and economy seats with extra legroom on those aircraft.

The goal is certainly to give travelers a greater premium exposure that Delta believes will be willing to pay for the updated product. Other airlines have added premium economy, but at the expense of some business class c -acity. This cabin aims to get more people to buy up from economy class but not business class that Delta seems to be seeing.

Delta moves to premium economy as the industry recoversPremium Select is designed to strike a balance between business and economy. Photo: Delta Air Lines

Delta has been very public in advocating more premium travelers. Premium Economy was a cabin that was surpassed on many airlines. These include Emirates, Lufthansa and Austrian Airlines. KLM is considering adding it to its aircraft and Finnair is moving ahead with its plans.

There’s a general simplification that business travelers are generally willing to pay more for a reclining seat on an international flight, while leisure travelers book the che -est fare and fill the back of the cabin with additional revenue. However, this is certainly not the case.

Delta moves to premium economy as the industry recoversIn a competitive market, the economy economy with more legroom is not a premium economy offer. Photo: Delta Air Lines

There are vacationers willing to pay more for an upgraded premium experience. Hawaii and Tahiti are examples of vacation destinations where airlines offer and occupy premium class seats on wide-body aircraft. Then there are small and medium-sized businesses that are more price sensitive when it comes to travel purchases and would be willing to buy into a premium economy cabin but pay the price outside of a business class cabin. With Premium Select alongside a large business class cabin, Delta is looking for options for both types of travelers and focusing on making sure the right inventory is available at the right price.

What does this mean for the Boeing 757?

Delta Air Lines used to fly a number of Boeing 757s across the Atlantic. For the next year, Reykjavik, Iceland will be the only destination across the Atlantic that this narrowbody aircraft will fly to the Delta. In recent years Delta has flown the 757 to places like Edinburgh, Glasgow, Lisbon, Malaga, the Azores and Shannon.

At some of these targets, aircraft were upgraded to 767-300ERs. Others were completely removed from the schedule. Looking at the route to Iceland, which is served from Minne -olis, Delta sells its premium couchette-style cabin as “Premium Select” rather than business class.

Delta moves to premium economy as the industry recoversThe premium reclining-style seats can be found on most Delta 757s. Photo: Jay Singh | Easy flying

Delta’s premium Boeing 757 offers more legroom than its aircraft, which are configured for domestic and international short-haul use. In terms of product standardization, however, Delta wants to ensure that it can offer four different cabin options: Business Class with a flat bed, Premium Economy, Economy with extra legroom and Standard Economy.

Delta moves to premium economy as the industry recoversDelta moves away from long-haul Boeing 757 routes. Photo: Vincenzo Pace | Easy flying

The Boeing 757 lacks the dedicated premium economy cabin. The problem with fitting a narrowbody is that it would take up a reasonable amount of space, which further reduces the c -acity on board the aircraft, which currently seats 168 passengers. Adding a premium economy cabin could cut that number down to the 150-160 seat range, which for long haul may be too small to be economical. The same goes for other long-haul narrowbody products, such as the Airbus A321XLR.

Delta’s 757s will play a critical role on domestic routes as well as international short- and medium-haul routes. But with premium economy becoming a focal point in the cabin, Delta doesn’t seem interested in putting these planes on thinner, possibly experimental routes like other airlines are doing.

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