Delta Turns To Premium Economy As Industry Rebounds

As airlines chart their way out of the crisis, there were plenty of new lessons learned regarding revenue…

Delta Turns To Premium Economy As Industry Rebounds

As airlines chart their way out of the crisis, there were plenty of new lessons learned regarding revenue and customer booking trends. While some pre-crisis strategies were quickly thrown out, others were accelerated amid new, and perhaps surprising, developments. Delta Air Lines, which has seen some strong revenue trends in premium cabins, is betting big on a cabin class it introduced only a few years ago: international premium economy.

Premium economy has been a winning cabin for Delta. Photo: Vincenzo Pace | Simple Flying

Premium products performed well

A trend Delta noted during the crisis was that its premium products were strong performers. For example, in domestic and short-haul international markets, Delta said its premium revenue exceeded those of its economy class revenues by approximately ten points. Compared to 2019, Delta reported that its paid load factors in extra-legroom economy (called Comfort+) and first class cabins exceeded 2019 levels.

Glen Hauenstein, Delta’s President, noted the following on the carrier’s third-quarter earnings call about what that means:

“I think the big epiphany for us was there’s a much broader demand for [premium products] than just business travelers, and if we have to pivot to demand sets for high-end leisure to fill those seats, that is a trade-off we’ll make.”

Evidence for this is clear in Delta’s financial results. With only 40% of business travel having recovered, Delta was still able to turn a profit, even excluding government support. This is a positive result since it means the carrier has a known presence with premium leisure travelers.

Delta Turns To Premium Economy As Industry Rebounds
Delta has seen strong demand for premium products – even with most business travelers sitting on the sidelines. Photo: Delta Air Lines

Bringing this to international routes

Earlier on Sunday, Delta loaded some changes to its transatlantic schedules for 2022. One of the key takeaways is that Delta is pushing forward with rolling out premium economy to European routes – something Mr. Haunstein stated that Delta had in the works for some time.

Adding premium economy to Europe has come by retrofitting existing airplanes. The Airbus A330-900neo and A350-900s were delivered new to the airline with the airline’s new premium economy product, called Premium Select. Delta has had to retrofit its Boeing 767 and Airbus A330 fleet to include premium economy. The long-term goal was always to get its international fleet retrofitted with this class.

Delta Turns To Premium Economy As Industry Rebounds
It was not that long ago when it was rare to find a Delta widebody with premium economy. Photo: Getty Images

Previously, Delta’s goal was to bring premium economy to all international widebodies by 2021. That goal was delayed due to the crisis, and Delta even rejigged its widebody fleet, retiring the Boeing 777 and cutting some 767-300ERs. However, by next year, Delta expects to have most of its widebody fleet retrofitted with the new cabin class.

The reason this class is key on international routes is that there is no premium leisure product Delta has in this space. Premium economy finds a niche between extra-legroom economy class and business class. Delta’s cabin, branded as Premium Select, is similar to a domestic first class seat.

Delta Turns To Premium Economy As Industry Rebounds
Premium 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 earn in this cabin versus an extra-legroom economy class seat is the key. But, another factor that can be seen in Delta’s revenue push is where Delta is taking away seats to fit this cabin in on an aircraft. Delta has not cut down on the number of business class seats it is flying on a widebody, but it has cut down on extra-legroom economy and economy seats on these aircraft.

The goal is certainly to offer a larger premium footprint to travelers that Delta believes are willing to pay for the upgraded product. Other airlines have added premium economy, though at the expense of some business class capacity. This cabin aims to get more people to buy up from economy, but not buy down from business class, which Delta appears to be seeing.

Delta Turns To Premium Economy As Industry Rebounds
Premium Select is designed to fit a middle ground between business and economy. Photo: Delta Air Lines

Delta has been making a very public push for more premium travelers. Premium economy has been a cabin that has outperformed at many airlines. This has included Emirates, Lufthansa, and Austrian Airlines. KLM is looking at adding it to its aircraft, and Finnair is still moving forward with its plans.

There is a general simplification that business travelers are generally willing to pay more for a lie-flat seat on an international flight, while leisure passengers are booking the cheapest fare possible and filling up the back of the cabin with incremental revenue. However, this is certainly not the case.

Delta Turns To Premium Economy As Industry Rebounds
In a competitive marketplace, extra-legroom economy does not cut it as a premium economy offering. Photo: Delta Air Lines

There are leisure travelers who are willing to pay more for an upgraded premium experience. Hawaii and Tahiti are examples of leisure destinations where airlines have been devoting – and filling – premium class seats using widebodies. Then, there are small- and medium-sized businesses that are more price-sensitive in their travel purchases, which would be willing to buy into a premium economy cabin, but be priced out of a business class cabin. With Premium Select alongside a large business class cabin, Delta is looking at offering options to both kinds of travelers, focusing on ensuring it has the right inventory at the right price.

What does this mean for the Boeing 757?

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

Some of these destinations have seen an upgauge of aircraft to a 767-300ER. Others have been removed from the schedule entirely. Looking at the route to Iceland, served from Minneapolis, Delta sells its recliner-style premium cabin as “Premium Select” rather than as a business class cabin.

Delta Turns To Premium Economy As Industry Rebounds
The recliner-style premium seats are found on most of Delta’s 757s. Photo: Jay Singh | Simple Flying

Delta’s premium Boeing 757s feature a larger extra-legroom economy than its aircraft configured for domestic and short-haul international use. However, when it comes to product standardization, Delta wants to make sure it can offer four distinct cabin options: a lie-flat business class, premium economy, extra-legroom economy, and standard economy.

Delta Turns To Premium Economy As Industry Rebounds
Delta is moving away from long-haul Boeing 757 routes. Photo: Vincenzo Pace | Simple Flying

The Boeing 757s are missing the dedicated premium economy cabin. The problem with putting one on a narrowbody is that it would take up a decent amount of space, further reducing capacity onboard the aircraft, which currently have room for 168 passengers. Adding a premium economy cabin could bring that number down to the range of 150-160 seats, which might be too small to be economical for a long-haul route. The same is true on other long-haul narrowbody products out there, like the Airbus A321XLR.

Delta’s 757s will play a crucial role on domestic routes and on short- and medium-haul international ones. But, as premium economy becomes a cabin of focus, Delta does not seem keen to put these aircraft on some thinner, possibly experimental, routes, which other airlines are doing.

Source : Simple Flying More   

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Six Years Ago: US Airways Flies Into The Sunset

On Friday, October 17th, 2015, US Airways was officially no more – at least on paper. Coming over…

Six Years Ago: US Airways Flies Into The Sunset

On Friday, October 17th, 2015, US Airways was officially no more – at least on paper. Coming over two years after the airline announced it would merge with American Airlines, it was the end of an era for the airline and capped off a series of airline mergers to create the landscape of carriers that dominate the US to this day.

Six years ago, US Airways flew its last flight as it merged with American Airlines. Photo: Getty Images

US Airways has a long history

Flight 1939 was aptly named, given that US Airways traced its history back to 1939 to a company called All American Aviation. Like most airlines tracing their roots to the early days of aviation, the company mainly flew regional routes and focused on airmail before branching out to passenger operations.

As the airline began to grow, it decided to shed its original name in favor of Allegheny Airlines until deregulation. Allegheny paid homage to the founding of the airline in Pittsburgh, Pennsylvania. Prior to 1978, the Civil Aeronautics Board (CAB) controlled nearly every aspect of airline networks and fares. However, with the passage of the Airline Deregulation Act, the entire competitive landscape of the United States, with airlines free to fly more routes than they could before.

Six Years Ago: US Airways Flies Into The Sunset
The USAir name did not come around until 1979. Photo: Getty Images

Allegheny decided to rebrand to appeal to a larger swath of travelers. It named itself USAir, started taking larger aircraft, and began to grow across the United States. It even acquired some airlines along the way, including Pacific Southwest Airlines (PSA) and Piedmont, in the 1980s.

It was not too long before US Airways turned its attention to becoming a known presence outside the United States. In the 1990s, the airline expanded its route network to cover international routes in Europe. In 1997, the airline underwent another rebranding to US Airways.

In the post-9/11 landscape, the discussion of mergers in the US ramped up, and US Airways started hunting around for a partner. In 2005, after filing for bankruptcy in 2004, it found a partner in America West. The US Airways brand survived the merger, though the America West identifier, “Cactus,” survived – as did America West’s management.

Six Years Ago: US Airways Flies Into The Sunset
US Airways and United Airlines were considering a merger in 2000, though antitrust issues led to those talks ending. Photo: Getty Images

The merger with American Airlines

US Airways attempted to merge with Delta Air Lines before a new wave of mergers hit the US landscape. That merger attempt was unsuccessful, given intense opposition from Delta and various stakeholders. When Delta Air Lines and Northwest Airlines announced their merger, US Airways started looking for an opportunity to merge.

United Airlines was an early prospect. In April 2010, the New York Times reported that the two airlines were in the middle of negotiations for a merger. There were some frictions between the two airline’s operations and network, not to mention labor issues that US Airways was working out among its own ranks. Those talks did not lead to a merger, and United later announced it would merge with Continental Airlines.

Six Years Ago: US Airways Flies Into The Sunset
US Airways and America West merged in 2005, but it wasn’t long before the new US Airways was looking for another merger partner. Photo: Getty Images

This sent US Airways looking again for a new partner, and it eventually turned its eyes to American Airlines, which was facing bankruptcy in 2012.

On Valentine’s Day, 2013, US Airways and American Airlines jointly announced plans to merge. The American Airlines brand would survive, and headquarters for the new airline would be in Fort Worth, Texas. Much of the US Airways management found new roles in top spots at American Airlines.

After clearing some hurdles with the US Department of Justice (DOJ), including slot divestitures, the two airlines moved ahead with the merger. They began to integrate their systems, their workforce, and more. Repainting the fleet – a daunting task – had also started.

Six Years Ago: US Airways Flies Into The Sunset
Now-CEO of American Airlines Doug Parker (then CEO of US Airways) with then CEO of American Airlines, Tom Horton, announcing the merger in 2013. Photo: Getty Images

The final US Airways flight

On Friday, October 16th, 2015, US1939 made its way around legacy US Airways hubs. The flight went from Philadelphia to Charlotte, then to Phoenix, then to San Francisco, and then on a red-eye to Philadelphia, where the Airbus A321 operating the flight arrived on Saturday, October 17th, just before 06:00 local time and marked the end of the US Airways brand.

The final flight was celebrated at all airports. With the merger, the future of the new American Airlines was on a much more solid footing than the old US Airways or American Airlines. However, there was plenty of uncharted territory to traverse. But, for one night, all of that did not matter as US1939 allowed for a moment in time to reflect on over 75 years of history – over 75 years of memories, triumphs, jubilations, and lessons.

Six Years Ago: US Airways Flies Into The Sunset
There was plenty of pomp and circumstance surrounding the final US Airways flight. Photo: The Airchive

This was mostly a change on paper. At airports, there were still US Airways planes that had yet to receive a fresh coat of paint in the new American Airlines livery. In fact, it was not until November of 2016 when all 299 former US Airways mainline planes in the combined fleet were officially repainted into the new American Airlines livery.

In addition, US Airways hubs were still maintained. Charlotte and Phoenix are major hubs for the new American Airlines. Coupled with legacy US Airways corporate management at the top, there were still plenty of US Airways memories to go around. One aircraft continues to sport a legacy US Airways livery, as part of American’s heritage series commemorating the airlines that came together to make the carrier it is today.

The final flight certainly was not without its controversy. Pittsburgh, Pennsylvania, was an integral component of US Airways’ history. However, US Airways ended up cutting its Pittsburgh hub after the airport took on hundreds of millions of dollars to support an expansion for the US Airways hub. Speaking to TribLIVE in Pittsburgh, then-Allegheny County Executive Jim Roddey called skipping Pittsburgh “the final insult” in the saga between the airport and US Airways.

Six Years Ago: US Airways Flies Into The Sunset
The final US Airways flight departed from San Francisco. Photo: Getty Images

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The new American Airlines

To this day, American and US Airways are continuing their integration. A merger to create the largest US airline is far from smooth. Couple this with issues both airlines were working on before the merger, and there was plenty on the merger to-do list.

Much of that work has already been done eight years after the merger. The new American Airlines has made excellent progress on standardizing the fleet. American has even rolled out new products since the merger and made good on bringing WiFi and power to its aircraft.

Six Years Ago: US Airways Flies Into The Sunset
US Airways flew into the sunset, and now, there is a new American Airlines. Photo: American Airlines

The American Airlines known today has retained US Airways hubs and has been changing up strategy. Teams from fleet to maintenance to network to frequent flyer programs have built a massive airline that works better together than two separate entities.

What are your memories of US Airways? Let us know in the comments!

Source : Simple Flying More   

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