Why airlines offer premium economy – they probably make more profit from those seats than any other
Premium economy is a money-spinner for airlines, because it offers little more than basic economy but can cost three times as much – at a time when first-class and business class revenues are flat
Travellers probably won’t be rushing to praise the airlines for it, but industry investors should find a lot to love in an innovation that offers just a fraction more wiggle room for twice the money.
As economy seats become more cramped, and business class gets more luxurious and pricey, demand has swollen for an in-between option that will give fliers a little more comfort without breaking the bank on long overseas flights.
That is how the “premium economy” seats offered in a growing percentage of international fleets have become one of the most lucrative innovations in modern flying.
Travellers pay prices that are broadly double – and sometimes triple – economy fares. And here’s the brilliant part from an airline’s perspective: in adding this cash-generating cabin, they incur only modestly higher costs without siphoning affluent travellers from their posher cabins.
“Anytime you can get paid double for something that does not cost you double to produce, that’s a pretty good place to be for any company,” says Seth Kaplan, editor of trade journal Airline Weekly, noting that the premium cabin “does not take up twice the real estate, the food does not cost twice as much”.