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Jan 23

United Adds Premium Economy. Are The Good Times Over?

United became the third airline to announce a premium economy cabin, which spokesperson Maggie Schmerin teased a few days ago.

What Is Premium Economy?

premium economy

The mock-up for the AA Premium Economy cabin

I’ve discussed Premium Economy before, but here’s a quick review:

The gap between traditional economy and business class, particularly on international products, is tremendous. Passengers have clamored for a better economy product but have been unwilling to pay the multiples of the price that it would cost to sit in business.

Premium Economy is set to bridge the gap. It is a product similar to domestic first class, with seat pitch (the measurement from seat back to seat back) and width exceeding what you would find at the back of the bus. Delta’s product, for instance, will offer 38″ pitch, versus 31-32″ in coach. It will also have some 2X2 seating, meaning the elimination of the middle seat (although some PE rows are 4-across).

United is also offering better food on better plates (Hint: Concentrate on the food. Who cares what it’s served on?) and Saks Fifth Avenue pillows and blankets.

Could This Be Bad News For The Airlines?

One thing you can count on, though, with the airlines, is that their timing is horrible. The problem with introducing a product when there is significant demand for it is that, by the time it hits the floor, the economy has turned south and the demand has dried up. And, as usual, they’re accelerating capacity growth (more supply) as they do so.

For example, the airlines have tried premium economy before. In particular, American did it back in 2000-2001, at the peak of the internet bubble. At that time, it was focused on pushing San Jose as a focus city and trying to appeal to start-ups who went to Asia but couldn’t afford to pay for business class.

And then the world fell apart. Stock markets declined, the US went into a recession and American realized that it couldn’t afford not to stuff the cabin full of seats.

To be fair, from a cost perspective, the airlines are in a much better position than they were back then, but I’m curious to see how long the premium economy experiment lasts.

 

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