Business Class Opens to Masses as Affordable Covid Refuge
(Bloomberg) -- Business class was that silent and spacious sanctuary for the well-heeled, at least until the pandemic destroyed global aviation. But as flights creep back, this once-exclusive haven is being invaded, by the masses.
Flush with cash and a record number of air miles after a year on the ground, leisure travelers are splurging on premium seats for their first trips back. They’re not just after the plated food, champagne and little cosmetics that typically come with the higher fares. Rather, they’re trying to minimize the risk of catching Covid in the cheek-to-cheek jostle of coach.
The popularity of these lucrative seats -- especially among passengers who’d usually shoehorn into economy -- is an unexpected boon for airlines weathering a crisis that’s forecast to have cost them a staggering $174 billion in losses by the end of 2021. As vaccinations roll out at pace in the Middle East, the U.K. and the U.S., free-spending vacationers are emerging as a new market to exploit for carriers desperate to claw back revenue.
New York resident Jennifer Arnold, an avid scuba diver, is flying to the Maldives via Doha on Qatar Airways in May. Though vaccinated, Arnold, who is retired, said securing a business-class seat was essential.
“It was strictly to try to sit in an area with fewer people,” said Arnold, who used points for the outbound leg and paid for her return flight. “I wouldn’t have taken this trip if I had to fly in coach while the virus is still raging in so much of the world.”
There’s every chance these people will become permanent residents up the pointy end. Carriers from Deutsche Lufthansa AG to Virgin Atlantic Airways Ltd. are now starting to question whether business travel as the world once knew it will ever return to pre-crisis levels. That means for the next few years at least, there’ll be a steady supply of premium-class seats priced to sell to the general public -- for cash, loyalty points or a mix of both.
Fares are already way off their peak as airlines stimulate a recovery. Transatlantic business-class tickets on Delta Air Lines Inc., British Airways and American Airlines Group Inc. in late May are going for a little more than $3,000. Those seats, particularly for last-minute bookings, could have cost as much as $9,000 before Covid, said Brian Kelly, founder of travel-advice website The Points Guy.
Flying to Miami from New York last month, Kelly found first-class seats were sold out on every single flight from all New York airports three weeks in advance. “I’ve been traveling New York-Miami for years and I’ve never seen that,” he said.
“People are swimming in points,” Kelly said in an interview. With more than 3 million people getting coronavirus jabs every day in the U.S. alone, air-travel demand “is about to skyrocket,” he predicts.
|Overseas Travel Is Reappearing:|
According to Qantas Airways Ltd., leisure passengers are taking up a larger share of the business-class cabin as they upgrade or redeem loyalty points. Redemption flights meanwhile more than doubled to record levels when domestic travel restrictions eased in November, the airline said. A representative for Delta said customer appetite for “premium experiences” has grown along with travel demand.
Leisure passengers’ desire to sit in a classy cabin is partially offsetting a stunted recovery from traditional business-class customers. Companies around the world have scaled back travel, either out of caution or to save money. And executives who used to fly at the drop of a hat for face-to-face meetings are more often making do with the video calls that have characterized remote work in the crisis.
“I personally believe that business travel is going down,” Virgin Atlantic Chief Executive Officer Shai Weiss said at the World Aviation Festival last week. “We’re going to see the emergence of the premium leisure market. People have saved a lot. They’re going to treat themselves.”
Jeff Paine, a Canadian who lives and works in Singapore, used points and cash to fly business class last month to Bangkok, and then onto Phuket with Singapore Airlines Ltd. He felt flying premium in the middle of a health crisis would be less stressful.
“I was trying to make some part of this journey easy,” said Paine, 51. “I had to get health insurance, Covid insurance, a certificate of entry, a visa, which isn’t usually needed, and quarantine bookings. It was challenging.”
Premium-economy cabins, which can be even more profitable than business-class sections, might play a key role in any aviation recovery, said Rob Morris, global head of consultancy at aviation data and analytics company Cirium. A quasi-blend of spartan economy and opulent business class, premium economy could capture those corporations flying on tighter budgets as well as leisure passengers wanting a little more comfort, he said.
“I can see premium economy becoming a bigger part of the overall real estate,” Morris said.
To be sure, traditional business travel may bounce back faster than anticipated once vaccinations in multiple countries make widespread quarantine-free travel possible. That would likely push up premium cabin fares and squeeze out some leisure flyers.
For now though, pent-up demand to see friends and family is so strong in some markets that it’s the corporates that are getting squeezed. Qantas has seen only 65% of business traffic return, even as travel in Australia booms. Delta’s domestic leisure bookings have reached 85% of normal levels, while the corporate recovery is “slow but steady,” the U.S. airline said this month.
“Summer is going to be about managing leisure demand,” Delta President Glen W. Hauenstein said on a an earnings call. “There’s a little less opportunity in terms of saving that last seat for the business customer.”
Tim Clark, president of Gulf airline Emirates, sees echoes today from the global financial crisis more than a decade ago, when business traffic also fell away. But even if that happens again, airlines can sell out their business class and premium economy cabins by dropping fares 15% to 20%, Clark said.
“You take what you can get and you ensure you fill your aircraft,” he said at the World Aviation Festival.
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