A rising demand for more comfortable flying is fueling a budget luxury arms race, with some airlines updating or adding premium economy services.
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Premium economy is having a moment.
Some airlines have revamped their premium economy services in recent months, with passengers increasingly tempted by the prospect of upgrading to more luxurious seating without blowing their budget.
Delta plans to roll out a premium economy service to transcontinental flights in September, while Singapore Airlines announced its updated premium economy class in March with a 200-item food menu.
This budget luxury arms race has been fueled by rising demand for more comfortable flying.
Both Delta and United saw double-digit rises in revenue from premium seating, which includes business class and first class, in the first quarter of 2024. While, Alaska Airlines said at a recent industry conference that premium sections now account for nearly a third of revenue, according to The Wall Street Journal.
"We have seen the demographics of travelers changing from what we saw before the pandemic," Collin Heller, Vice President at aerospace consultancy Counterpoint Market Intelligence, told Business Insider.
"Business travel has not returned to normal in many regions, but the leisure traveler demand is fairly strong. We are finding that many of these travelers are willing to spend more for quality and are often less price-sensitive," he added.
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Airlines have become increasingly adept at playing on this desire for more bougie transport through "upselling," the art of bombarding passengers with carefully timed offers and emails to convince them to upgrade.
Counterpoint director and aircraft interiors expert Rob Semple told BI that the key to convincing passengers to upgrade was to make premium economy "visibly better" than economy class to increase the sense of FOMO — while still maintaining a luxury gap between premium economy and the more expensive business class.
"Many passengers now view long haul economy travel as a feat of endurance, so are prepared to pay to travel in more comfort to 'escape from the madness,'" said Semple, who described premium economy as a "sweet spot" between cost and luxury.
"Passengers in premium want to feel rested and ready when they disembark after a flight. They want additional space with better privacy, an enhanced ability to 'control' your space so that you can decide to work, rest or relax, and a better on-board service level," he added.
Premium economy is also increasingly appealing to businesses, with many seeing it as an opportunity to transport their employees in relative luxury without splashing out on business class.
Travel industry analyst Henry Harteveldt told BI that many businesses now considered premium economy good enough for shorter long-haul flights and are choosing it over business class — much to the chagrin of some employees.
"For flights that are going to be under seven or so hours, especially on a daylight flight, daytime flight premium economy is often considered comfortable enough for an employee," he said.
"This decision has not been met with open arms by travelers who frankly enjoy flying business class," he added.
He warned that airlines would have to walk a fine line to avoid premium economy sections from cannibalizing more expensive business class seats as they become the default option for many luxury-seeking travelers — but said the popularity of economy-plus was unlikely to go away anytime soon.
"We all know that economy class sucks on pretty much every airline. In fact, it's a deliberate decision in the case of some airlines to make economy so intolerable that travelers will pay a premium to move up," said Harteveldt.
"The benefits are compelling…premium economy is an affordable way for travelers to have a much better journey while still staying within a budget," he added.
