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Trend: Is premium economy squeezing business?


Airlines that until fairly recently were pushing more premium seats and fancier ones into the front of their planes may now be in a reverse trend of eliminating high-price business-class seats in favor of mid-price 'premium economy.'

A recent report in Bloomberg Businessweek put its finger on a reason for it: with business travel is trending down, especially since the pandemic and leisure travel demand continuing to strengthen, there's money to be made in the middle category. Lufthansa told Bloomberg that premium economy generates 33% higher per-square-foot revenue than economy and 6% more than business.

And there are more of those square feet to be had; Premium economy seats,  which typically have a few inches more footroom and a marginally wider seat, take up 10% more space than economy, while business-class takes three times as much room as an economy seat. Even with the drink or two and maybe a food upgrade, airlines are finding the arithmetic works; remove six lie-flats and get 15 premium economy seats. And those seats cost the airline a fraction of what it pays for the fancy stuff.

All of the U.S. major airlines are increasing their premium economy offerings, as are a number of overseas airlines. Lufthansa, a leader in the field hesitated over the possibility it would cannibalize bookings from business class, but has gone ahead after finding that few business class travelers were downgrading while there was a significant upgrade demand from the folks in the back of the plane.

Image: American Airlines premium economy seats (AA photo)

The best part of every trip is realizing that it has upset your expectations

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