Premium Squeeze? Corp. Travelers Battle for High-End Air Seats

Executives from the three largest US air carriers in recent months have touted the high demand for premium seats by leisure travelers, a trend they expect to continue. But what does it mean for premium-class availability for the returning road warrior as business travel finally picks up steam?

Indeed, some buyers and even suppliers told BTN that premium seats can be harder to find for corporate travelers on some flights, and, when available, the fares for them have been “shocking,” one travel buyer told BTN.

Premium products have been “anywhere between five to 10 points stronger on a comparative scale than our other products that we sell,” Delta CEO Ed Bastian said during a June Bernstein conference. “Those people, once you go into the premium category, they’re not leaving. … And businesses now are having to fight their way back onto the airplanes because of the premium consumers that we have. All of that is creating a lot of pricing momentum.”

Another buyer who asked to remain anonymous said that general airline availability and “especially premium seats and services were a huge point of frustration,” noting that service even for the buyer’s board and executive committee members were being “negatively impacted.”

On busy flights and busy days, if you try to book very late for a flight next week, it might mean there is very limited to no capacity left for the business traveler.”

– Lufthansa’s Heinrich Lange

This phenomenon is not limited to US airlines.

“We do see a trend that, more and more, private customers want to spoil themselves a bit with a premium product,” Lufthansa senior director of sales for Northern Europe Heinrich Lange said in an interview during the Business Travel Show in June. Coupled with the other trend he noted—shorter booking windows for corporate clients—“on busy flights and busy days, if you try to book very late for a flight next week, it might mean there is very limited to no capacity left for the business traveler.”

Manoj Chacko, EVP of global services for global business process management company WNS, concurred when asked about current challenges for business travelers. “The first one is access to seats,” Chucko said. “Not all airlines are back at full capacity, and I’m noticing the fare levels are higher compared to pre-pandemic. There is clearly demand exceeding supply at this time, especially when you get into corporate travel booking windows.”

Booking times have “really come down,” he added. “Around the world we are seeing a similar phenomenon—premium seats are just not available.”

Route Dependency

Still, the buyer who called premium airfares “shocking” and noted the difficulty in finding premium availability for business trips, acknowledged that the route and the arrival and departure region are key factors.

“Our highest volume internationally is New York-London, and we know there is an premium economy offered on most US carriers going to London, so I think for that type of trip, premium economy is available,” the buyer said. “It’s more domestic or interregional where premium economy is in high demand because of so many leisure travelers.”

But the buyer added that for destinations like Orlando and Las Vegas, popular among both leisure travelers and meeting attendees, “there’s a clash between leisure and business buying the same limited inventory.”

In fact, even though the buyer’s organization’s 14-day advance purchase for domestic prices, the company is considering domestic ticket purchases 21 days out since 14 days might not be sufficient “because of inventory shortages.”

We’ve been advising all corporate and business accounts in a busy summer like this to book early. … In order to get the seat you want, it will be important to book as early as you can.”

– American’s Kyle Mabry

This tactic is in line with what American Airlines has been telling corporate customers.

“There is growing demand in every segment we serve, which means business and leisure demand in the marketplace,” American VP of worldwide sales Kyle Mabry told BTN in late June. “We’ve been advising all corporate and business accounts in a busy summer like this to book early. That’s always been the advice. In order to get the seat you want, it will be important to book as early as you can. We’ve been finding that our business customers are doing that.”

Mabry added that American is “expecting a strong fall as well, and demand again in all segments is headed upwards,” so that advice will spill into next season.

American also is seeing a blurring of lines between business and leisure in how and when people travel. “Thursday still is our biggest business day, but it’s also becoming our biggest leisure day, and we have more people buying a business-style fare product and travel as if on business, but they are going to [a beach destination]Mabry said.

Content Booking Issues?

Still, while noting that second-quarter premium leisure demand grew about 30 percent faster than the back-cabin leisure demand, “on 90 percent of our two-cabin flights we had front-cabin seats to sell the day before departure, which is unchanged from 2019,” United Airlines VP of sales strategy and effectiveness Glenn Hollister told BTN in late June.

One reason some business travelers might be having trouble finding a premium seat “has to do with other parts of the chain that get United content in front of business customers,” he said, citing global distribution systems.

The carrier has had “many complaints” from customers about a lack of full content in corporate booking tools, Hollister said. “We’ve done extensive troubleshooting the last few months, and the core source is a shopping issue at a major GDS not returning all results,” Hollister said without identifying the GDS, adding that the issue arose only when shopping by price. “Specifically, we’ve seen many cases where premium seats are not showing up through the GDS.”

United worked with the GDS, which implemented a fix, Hollister said in a follow-up August email. “We continue to work with the GDS to ensure that the full content we provide the GDS is available to all corporate customers in their OBT, and we will continue to work with customers, the OBT and the GDS involved until we are highly confident in the solution.”

More Premium Supply

The perceived challenge of business travelers having difficulty in securing premium seats might naturally subside as carriers introduce more supply. United, Delta and American have committed to increasing the premium seats available in their fleets, both via new aircraft deliveries and retrofitting existing planes.

“We made some pre-Covid bets to increase the number of premium seats in our fleet,” said Delta EVP of global sales Steve Sear in late June. “Those premium seats are tracking higher than our main cabin seats. We saw that pre-Covid, and it’s now accelerated, mostly permanently.”

On Delta’s transatlantic routes, “close to 100 percent [of aircraft] will have Delta Premium Select for the first time,” Sear said. “It’s a new product, and the demand is outstanding for it.”

He added that on its Airbus A350 and A330-900 aircraft, the airline was increasing the number of those seats made available.

As part of the United Next plan, the carrier is buying 500 narrowbody aircraft over the next five years, Hollister said, adding “that increases the average size or gauge of the aircraft. We’ll have bigger airplanes, and we’re allotting more space to premium seats.”

Another part of the plan that does not have as “high awareness,” Hollister said, is that “we are retrofitting our existing narrowbody fleet to the same standard,” for a “dramatic increase” in premium seats.

Still, that pent-up travel demand and desire for premium tickets by leisure travelers could dissipate, especially if prices continue to rise or the economic downturn comes to fruition.

“My view is part of that demand is artificial and could be temporary,” WNS’ Chacko said. “People [may] splurge one time. But I’m not really sure because once they’re used to a premium product, they won’t want to go back. How long that will last is the question. If I was an airline, I wouldn’t make long-term seat configurations on this. Let things settle down. Putting more rows in business class or premium economy, that may be a bit premature.”

Leave a Comment