The question posed in the headline of a recent article caught our attention: “The Death of Business Class? The Rise and Rise of Premium Economy” it read.
Sure, Premium Economy is on the rise, becoming a popular solution for the widening gap between a more comfortable Business Class and a less spacious Economy cabin for passengers who want more comfort and better service without paying a hefty price tag. But does it really spell the doom of Business Class?
According to Eric Olson from our Global Business Consulting arm, that’s highly doubtful, especially when airlines are hoping this option encourages passengers to buy up, not down. Even though Premium Economy has been around since 1992, it only started taking off in 2009 during the Global Financial Crisis. That’s when airlines saw that many companies were cutting costs by reducing their Business Class policy, so instead of having corporate travelers slide all the way down to Economy, airlines began pushing Premium Economy. However, as it turns out, the demand for Business Class has remained resilient, and so carriers have begun shifting gears, attempting to entice more frugal companies who buy Economy seats to give Premium Economy a try, in the hopes they’ll move up incrementally.
Premium Economy may be a good solution, but it will require policy revisions. One of the “cleanest” ways to roll out a Premium Economy policy is to carve it up by flight duration, like how many companies treat their Business/Economy policies. For example, an organization that allows Business Class on flights over six hours may decide to bump it up to eight and then offer Premium Economy on flights between six and eight hours to reduce any resulting traveler friction. Another solution for long-haul flights may be to base it on the time of day that travelers are allowed to fly; for example, Business Class at night (so they are well-rested and can hit the ground running when they land in the morning) and Premium Economy during the day. If you are considering buying up from Economy in order to make your program more traveler centric, it is best to do so sooner rather than later so you are in a good position to negotiate first-mover advantages with airlines before Premium Economy really takes off.
To find out how to implement Premium Economy seamlessly into your travel program, please contact your Client Manager.