I’m talking about routes where (as a guideline) the flight lasts over two hours non stop. In these circumstances, does the bigger profit come from Business Class or Economy Class passengers.
(Obviously more money comes from economy as there are a zillion passengers, I was thinking of pro rata).
I just went to British Airways, and looked at a flight from Los Angeles to Heathrow, leaving on March 31, and returning on April 7, lowest price, flexible conditions, one adult.
Economy class: $593
Premium Economy: $1584
Business/Club: $7290
First Class: $20650
Now, I’ll concede that the higher classes offer a lot more comfort and convenience to the passenger than the lower classes. But your question is about profit; in other words, how much does it cost the airline?
Well, the food does cost more. And the seats are larger, which means each upper-class passenger has to cover more than the equivalent of a single lower-class passenger. I also presume that there are other perks, like special luggage handling, and seats which are not only large but fancy.
But even with all that, does the airline spend 267% as much on a Premium Economy passenger as on a Plain Economy one? Do they spend 460% as much on Business/Club as on Premium Economy? I really doubt it.
Also: If more money came from Economy (pro rata, as you asked), then they would not bother selling upper class seats at all, and just make big bucks on a totally economy seat flight. They’d surely love to make the whole plane upper class, but there just aren’t enough people to fill those seats, so that’s why the plane is mostly economy and partially upper class.
On the other hand, some airlines do pride themselves on having only upper class seats (Southwest and Jet Blue, if I’m not mistaken) so it is entirely possible that I have no idea what I’m talking about.
Not at all. For a longhaul flight, the cost per available seat-mile for a passenger in first class is going to be pretty close to that of someone sitting in economy. The bread and butter is in attracting people to sit in first class and pay that premium for the amenities (both in the air and on the ground). People are paid to ensure that the actual cost for those amenities is as cheap as possible. Sure, the food may be a bit more expensive. The seats may be a bit nicer. But when you compare such things on a CASM basis, you see that the majority of that first class premium ends up being profit (assuming you don’t have to subsidize a loss in economy with it).
Simply, CASM is about the same. RASM is higher up front. Profit.
Southwest and JetBlue have low CASMs (generally speaking, and for a variety of factors), which helps illustrate that leather seats aren’t really a huge drain in the long run.
Sure, but there are proportionally fewer available seat-miles in business/first because there are fewer seats per square foot of plane. That is, the cost difference between economy and business class to the carrier would be negligible if the seats were the same, but they’re not; for every 10 8 seat economy row in a widebody there will only be space for maybe 6-7 6 seat business class rows.
Right; this is where revenue management really steps up to determine what kind of premium you need to charge to at least break even. In Keeve’s example booking, without really knowing the details of BA revenue management, my guess is that they’re making a tidy profit off of those seats. The real risk is upfront – when you determine how many of these premium seats you’re going to offer. You don’t want them to go out empty, but you don’t need higher demand than what you have to offer. A lot of variables come into play, but the ultimate goal is to make the front seats the breadwinners for the flight.