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Premium Economy's Benefits & Its Single Disadvantage

Published by Business Travel News
11/25/2015

As more air carriers establish premium economy as a distinct service class, buyers gain a tool to increase both traveler satisfaction and savings.

As business class travel has risen, 3 percent to 5 percent higher in 2015 than it was a few years ago, buyers have become more lenient with their premium class policies, said American Express Global Business Travel global business consulting manager Thomas Nicholson.

In a recent Travel Leaders Group survey of 392 United States-based executives at agencies that handle mostly business travel, 67.4 percent of respondents said more than 10 percent of their bookings are for first or business class. That’s a slight uptick from a year ago and significantly higher than the 55.9 percent of respondents who said the same in fall 2013.

“It’s very pronounced in California, where talent retention and recruiting is the focus,” Nicholson said. “A lot are allowing the traveler who has to go internationally six times a year to fly business instead of coach.” Not all segments are thriving like the tech industry, however, and some companies continue to tighten their premium class policies. The Travel Leaders survey indicated that 4.1 percent of respondents had zero premium class bookings in 2015 so far, up from 2.3 percent a year prior.

For those allowing more premium class travel and those cutting back, premium economy is another option, said Bob Brindley, vice president and principal of BCD Travel consulting unit Advito. His U.S. clients both have allowed travelers formerly restricted to standard economy to fly premium economy and have moved international travelers from business class down to premium economy. “It’s not widespread, but there’s been a little bit of movement in both directions toward premium economy,” he said.

In Europe in the past six months, the trend has tilted toward upgrades, Radius Travel head of global sales Emmie Mees said. “We’ve had more clients talking to me about the value of moving people from economy, particularly segments of their travelers like the road warrior types. They’re looking to review their policy to say, ‘If you come into that bracket, you don’t have to travel on the back of the bus.’ And you do arrive feeling far more refreshed than if you traveled economy.”

Premium economy, after all, is about more than extra legroom and early boarding. On Delta Air Lines, for example, Comfort+ passengers get free alcoholic beverages, snacks and, on cross-country flights, amenity kits. Outside the United States, premium economy often features separate cabins with even more amenities.

During earnings calls for the past two quarters, Delta has noted an uptick in Comfort+ sales. And United Airlines version is gaining traction, said vice president of sales for the Americas Jake Cefolia. October turned in the carrier’s highest sales ever of Economy Plus on Travelport and the second-highest on each Sabre and Amadeus, he said.

“We’re finding a lot of business customers, if their company policy doesn’t allow premium economy, will pay for it themselves because of the affordability of the upgrade,” United senior vice president of worldwide sales Dave Hilfman added. “That shows we’re on the right track with the product itself.”

Mentor Graphics offers a certain, flat co-pay toward the business class upgrade fee, and any traveler who wishes to upgrade pays the difference, but global travel and meetings manager Joe Taus said the proliferation of premium economy offerings warrants reevaluation of that policy. “We have to do some cost analysis to see whether we want to offer this,” Taus said. Travelers that have loyalty program status with the suppliers often get upgrades for free, “but with more international carriers coming out with this, we will have to revisit our policy.”

Free upgrades into premium economy are becoming less common, especially on international flights, Brindley said. “The days of status putting you in a better section is much less now,” Brindley said. “The focus is not to add service for frequent-flyers. It is to drive additional revenue, so it’s basically another ancillary fee.”

Companies That Have Changed Policies

Tribune Media recently made its premium economy policy more generous, said corporate travel manager Valerie Fender. Use had been restricted to flights of at least four hours and an added cost of less than $75, but the policy now allows any traveler to book premium economy if they intend to work on the flight. “We trust them to make that call,” she said.

Her policy, which allows business class on flights longer than six hours when budgeting permits, has become looser in terms of audit rules in the expense process. “I want to be perceived as the advocate for the traveler, not the police,” she said. “You have to have faith that people will do the right thing.”

Baxalta has reduced the business class threshold from six hours to five, and travelers on flights between three and five hours can book premium economy when it’s available, said global travel manager Mary Batal-Riley. For her program, it’s a compliance incentive contingent upon booking 14 days in advance of travel. “You can have the carrot if you buy it the proper way, use the proper channel, buy it with the card and book it in advance. It’s about making sure both sides win.”

What’s A Buyer To Do?

New products soon may force buyers to adapt policies anyway. JetBlue’s Mint straddles economy and business class in both pricing and service, and purely business class carrier La Compagnie, which launched in 2013 and operates between Newark and both London and Paris, is priced similarly.

Such offerings aren’t yet prolific, but they “can be really tough, because polices are black and white,” Brindley said. “You have these tweener situations, and there even can be situations where one carrier’s business class is cheaper than another carrier’s economy, so there can be room for exceptions.”

As such, many buyers measure the costs of ancillary amenities against a premium economy class’ offerings and price. That helps evaluate not only the worth of a premium economy class but also the comparisons among airlines, Mees said. “The traveler’s perception can be that premium economy is as sumptuous as business class in other airlines. When they’ve got new fleets, [premium economy] can be very similar to business class on some older, classic airlines.”