OAG Travel News

The statistics are appalling: premium ticket sales continue to fall – they were off 21.3 percent off in June 2009 compared with June 2008, according to the International Air Transport Association Premium Travel Monitor, which should have most airlines in a catatonic tailspin. Premium travel numbers have been in decline for 12 consecutive months.

Even the business travelers that are staying in the front of the plane during the down-turn are doing so at cheaper rates; revenues from premium travel fell even more – 41 percent in the second quarter as airlines slash prices in a frantic attempt to maintain demand.
 
The effect on the bottom line has been catastrophic. Consider this: according to IATA, ‘Premium passengers are responsible for 25-30 percent of passenger revenues but only 7-10 percent of numbers.’ Every percentage loss of travelers in the premium cabins reflects on the yield like a shadow on the wall.

And yet legacy carriers have only themselves to blame. They failed to learn the lessons of the 9/11 crisis, which exquisitely coincided with the cusp of a recession, and sent travel into free fall – precipitating a sea change in the way people view business travel, and view their lives, sharpening their priorities.   And they failed to understand that their ‘branding,’ their class system as it had evolved over the past 40 years had got out of sync with the changing needs of the business traveler.     What is more, they have ‘debased’ the value of the brands they have spent zillions zealously advertising, through indiscriminate upgrades and cut prices.

I remember Jan Carlson, former CEO of SAS, saying years ago, just before SAS replaced its first class cabin with an upgraded business class, that ‘Our first class cabin is the most expensive staff dining room in the sky!’

When I started traveling on business in the mid-1960s, there were only two classes on the old narrow-body planes and the early jumbos – first and economy. And only three types of fare: first; full (flexible) economy; and ‘excursion.’

First class was a golden ghetto for chief honchos and the seriously rich. Everyone else flew economy – which wasn’t nearly as grand as business class is today: you had to pay for drinks and headsets (with those little plugs that used to bore into your brain) but the food was okay and you had enough space to stretch your legs. Cattle class it was not. And it was democratic. You might find yourself chatting to a lieutenant if not a captain of industry, a diplomat, an aircraft salesman, a honeymoon couple, or perhaps an ambiguous lady of uncertain provenance. There was much scope for social congress.

My fondest memory of those days is of flying back from Chicago to Europe. Staff at the row of airline check-in desks behaved like barkers at a fairground. As most flights left more or less at the same time in the evening, I would up and down with my flexible ticket and bestow my custom on the airline that would ‘guarantee’ me four seats across,  ideally behind the bulkhead  in the non-movie section of the cabin, where I could stretch out and sleep. More creative souls would invoke a last-moment client meeting and upgrade to first class using their Air Travel Cards, swearing blind that there were no seats left in economy.
 
Life became more complicated when business class emerged as a third cabin in the late 1970s. The idea, you may remember, was to ‘reward’ business travelers paying the full economy (Y) fare on the new wide-bodied planes with their own exclusive cabin, sequestrating them from backpackers and savvy leisure travelers who might have paid two-thirds or less for their tickets. Comfort and service in most long-haul business class cabins is arguably more comfortable than the old first class, with lie-flat all-singing-all-dancing sleeper seats, and a galaxy of perks and gizmos; but a lot less exclusive.
 
Legacy carriers have learned much from the ‘no-frills’ model – about such things as ‘yield management,’ which aims at getting the maximum ‘yield’ for a given flight. The old notion of ‘official’ fares has disappeared. The price you pay depends on the cabin you fly in, ticket flexibility, advance booking, day of the week, and the time of day you travel. There are more combinations of prices than possible moves in a game of chess.    Larger planes meant more seats to fill – at any price.   While premium cabins have become ever more opulent, and expensive, economy travel has never been cheaper, or more degrading.

Piling on frills inevitably piled on the price of the ticket. First class can cost twice the price of business class, which in turn costs up to four times more than a fully flexible economy ticket and 20 times more than the cheapest excursion ticket.

Faced with a blizzard of discounted or ‘gray’ fares, upgrades, special promotions, such as two-for-one fares, and a maze of frequent flier awards, it’s easy to pay a lot more for a lot less – or vice versa.

Virgin Atlantic re-invented the two-class (first/economy) system in 1985 with its Upper Class – billed as first class service and comfort at business-class prices. Upper Class became the concept for the early 1990s as several airlines abandoned first class for a more spacious business class (business class had become a tough act to follow; though there are always people prepared to pay serious money for serious in-flight real estate.)
 
Continental Airlines was the first carrier to create a combined first/business class, followed by Delta Air Lines, Air Canada, KLM, and many others. Even airlines that have kept first class cabins, only offer them on certain routes.

Full economy fare is the worst buy in the sky, unless you’re using it tactically to upgrade. If you’ve got to sit in the back, you might as well shop for the cheapest discount fare, savor what you’re saving, and if you have to change your plans, just throw away the return coupon and buy another ticket.

Premium economy is a successful compromise between the ever-increasing cost of business class and the squalor of cattle class. It attracts and business travelers whose budgets, or corporate travel policies, do not permit them to fly business class; and many leisure, especially older people.  The idea was to ‘reward’ economy passengers paying the full fare, and passengers who could no longer afford business class, with a separate cabin – echoing the rationale for business class 40 years ago.

According to British Airways’ research, typical premium economy passengers tend to be self-employed or work for small to medium sized companies; or honeymooners. Savvy travelers often mix classes, flying out in economy, and back in premium economy, or vice versa, depending on the need to work or sleep.

Taiwan carrier Eva Air was the first airline to introduce a premium economy cabin in May 1991, the year it started flying, with Evergreen Deluxe (renamed Elite Class on Boeing 777s), that rewarded economy passengers paying the full (Y) fare with a separate cabin, and better seating and service, followed in turn by Virgin Atlantic a year later, British Airways, Air New Zealand, and a growing number of other carriers that include All Nippon Airways, BMI, SAS, China Southern Airlines, HINA Southern Airlines, Garuda Indonesia, Vietnam Airlines, and Thai Airways on certain flights.

Travel value in travel does not depend on how much you spend but on a shifting equation of cost, convenience and comfort – exacerbated by safety/security measures and the concomitant frustration suffered by road warriors. And luxury too is a moveable feast; it often depends on the dialectical balance of your priorities.

We all travel in what I call different modes, depending on the purpose of the trip and where we are going. There are times when the most welcome sight in the world is someone holding a card with my name on it when I emerge from immigration – especially at a strange or gritty airport after a long flight; or to see the inside of an airport lounge where I can suffer in comfort during an impromptu three-hour wait for a delayed flight.

Airlines are foolish to assume that that ‘business’ and ‘leisure’ travelers have a different set of needs and behavior.   As I have often pointed out, neither category is monolithic; people travel in raft of different ‘modes,’ different frames of mind, with different needs, motivations, priorities and prejudices, depending on why we’re going and where we are headed. Business travelers may range from ‘hard-core’ (clinching a deal) to ‘soft-core’ (attending a conference; combining business with pleasure). Some corporate travelers have deeper pockets than others; individual and small-business travelers, for whom travel expenses are their bottom line, may share budget priorities with back-packers and package tourists.   And there is no shortage of ‘high-end’ leisure travelers among the denizens of the first-class cabins.

Travel mode often dictates choice of airlines and hotels and class of travel and the price we are prepared to pay. Road warriors may sometimes switch modes on the same trip for ‘business extension’ weekends with their partner. Business travelers can become leisure travelers when they are on holiday, or even package tourists when traveling to unfamiliar places. How you choose to spend your time in the air may depend on your mode – hence office mode, dining mode, relaxation/entertainment mode, or indeed a bad mode. On the morning flight out when you are wide awake, you want to work; coming home, you may want to relax, or sleep.

Thus, traveling west during the day, when you’re ready to drop into bed anyway when you arrive, you might opt to fly premium economy, even economy on a very cheap ticket – especially if you can target an off-peak flight with an empty seat next to you. For a fraction of the difference between cattle and business class you could afford to ‘upgrade’ to gourmet class with your own sandwiches filled with high-rent items such as smoke eel, a pound of beluga caviar and perhaps a thermos of cold vichyssoise. Traveling east, you might want to invest in a sleeper-seat in business class, and pass on the meal.

I remember Concorde for the exquisite discomfort of sitting in a 100-seat cigar tube. You have about the same legroom as cattle class, but you feel no pain. After all, you are getting there in half the time. How good you feel about it may depend on how much you value your time (and where you want to spend it) – as distinct from how much you think your time is worth.

The jury is still out on whether one class business-only airlines are a viable model for the future.

But the Airbus A380 super-jumbo, capable of carrying up to 800 people opens the prospect of the ‘flying village,’ allowing passengers a choice of where they sit and move around.
I could envisage one of the airline alliances, such as Star Alliance or Oneworld, operating the ‘flying village’ for member airlines, who might share the same plane on certain routes, with their own fares, flight attendants, in-flight cuisine, amenities and style of service.  Franchises would be sold for wining and dining – from gourmet to fast food (although what’s the point of fast food on a 16-hour flight?) and other amenities.

The notion of first class, business class and economy might disappear in favor of ‘a la carte’ travel, whereby you would book a seat, or a cabin, and pay extra for meals, in-flight perks, entertainment options, lounges, fast-track security, curb-side check-in and door-to-door limo transfers. Traveling cattle class might not be so much of an ordeal. You need only be stuck in your seat for take-off and landing; the rest of the time you’d be free to move around the plane and explore the facilities.

Meanwhile, airlines should take a hard look at the complex mess that their notion of class has become.

The time is long overdue for them to adopt the time-honored corporate practice of re-inventing the wheel.

www.rogerandrandy.com