Cheap seats are no longer sufficient for travelers on airlines.
Travelers have demonstrated to airlines that they are prepared to pay more to seat in the comparatively roomy front section of the aircraft since the outbreak. Since many of the seats are already taken, frequent travelers have a difficult time getting free upgrades to the front of the aircraft.
Additionally, there is increased competition for those seats as the ranks of frequent passengers with elite status are growing from the airport lounge to the crowded first boarding group. Airlines forecast that the year-end Christmas period will see even more crowds, setting yet another record.
In early 2025, CEOs have predicted robust demand even during the off-season. According to aviation data provider Cirium, the capacity of U.S. carriers in the first quarter would increase by roughly 1% compared to the same period last year.
At a November investor day, Delta Air Lines President Glen Hauenstein stated, “We’re probably seeing our best unit revenues on the transatlantic [routes], for example, in the dead of winter.”
Of course, factors like distance, demand, season, and even time of day affect the price difference between first class and coach. For instance, during the first week of February, a round-trip ticket on United Airlines from its hub in Newark, New Jersey, to Los Angeles International Airport cost $347 in standard economy and $1,791 in the airline’s Polaris cabin, which has lie-flat seats but no access to the international business-class lounge.
During the week of Easter in 2025, American Airlines’ nonstop travel from New York to Paris cost $1,104 in coach and $3,038 in Flagship Business class.
The airline industry depends on billions of dollars in revenue to stay afloat. Airlines’ loyalty programs are a money-making machine, and it’s crucial to strike the correct balance between offering benefits like free upgrades and making money.
Airlines have modified the requirements to obtain status in recent years, rewarding spending in addition to mileage traveled. Additionally, they have increased the cost for fliers to be granted elite status. Customers will need to spend more on United in order to obtain status next year. However, American announced on Thursday that it would maintain its criteria for the upcoming fiscal year, which starts in March.
From giveaways to paying up
Just 12% of Delta’s domestic first class seats were paid for by passengers approximately 15 years ago. Last month, Hauenstein informed investors that the percentage was approaching 75% and increasing.
Regarding first-class seats in 2010 and before, Hauenstein stated, “We gave them away based on a frequent flyer system.” Spending as little as possible, flying as long as possible, and getting upgraded as frequently as feasible were the incentives. As a result, our most valuable products ended up being the main causes of loss.
He claimed that since more money is now going to the front of the cabin, Delta has reversed that. Main cabin economy tickets now account for 43% of the carrier’s revenue, down from 60% in 2010.
From the most lucrative airline, Delta, to low-cost carriers like Frontier Airlines, which plans to add more spacious first-class seats to the front of its Airbus aircraft in 2025, the trend is sweeping the industry. JetBlue Airways announced on Wednesday that it would launch junior Mint, a two- or three-row domestic business class with lie-flat seats, on aircraft that do not have its top-tier Mint business class.
After purchasing Hawaiian Airlines earlier this year, Alaska Airlines stated a day earlier that it would equip some of its aircraft with premium seats in preparation for future international flights. Revenue from the more expensive seats exceeded that of ordinary economy.
At an investor day in New York on Tuesday, Andrew Harrison, Alaska’s commercial chief, stated that the Airbus 330s and Boeing 787s are under-indexed in business class and do not have an international premium economy cabin. Therefore, we anticipate that our premium mix will keep expanding after 2027.
Bigger business
These days, airlines are vying to introduce first-class sections or larger international business classes with flatbed seats that have doors that close and larger displays.
According to Scott Chandler, American Airlines’ vice president of revenue management, the paid demand for premium cabins has increased more than it had before the pandemic. More individuals are interested in the luxury cabin experience.
With post-purchase possibilities to upgrade to first class or other cabins like premium economy, Chandler said American has worked over the past few years to make it easier for passengers to purchase up to pricier cabins.
Like other airlines, American is renovating some of its longer-haul planes to have more upscale seating and eliminating first class entirely on certain to install larger international business class cabins with new sliding-door seats. In order to accommodate passengers who are willing to pay for the more expensive seats, Delta and United have also expanded their premium options.
They are making every effort to persuade you to purchase their high-end goods. According to Henry Harteveldt, founder of the travel consultancy company Atmosphere Research Group, that is exactly what they ought to do. In a department store, customers do not purchase a store-brand item and then expect the salesperson to ring up the purchase and give them a designer bag for free.
Southwest Airlines has adopted a different strategy. It intends to eliminate open seating and retrofit its conventional coach-only cabins, which it has operated for more than 50 years, with multiple rows of extra-legroom seats in 2026.
According to CEO Bob Jordan, there is a generational shift at play.
In an interview this week, he stated, “We’re seeing our younger customers seeking a little more premium.” This is mostly due to a change in mindset, where people are willing to spend more on travel and less on other things.
However, after surveying consumers and assessing the expense of losing capacity for more seats on board, the airline chose to maintain a relatively similar number of seats on its aircraft and is not introducing a first class like other carriers.
Jordan remarked, “You’re talking about ovens, meals, and provisioning for first class.” It’s a significant leap and a significant capital investment.
But, he said, never say never.
More from CNBC:
-
GM’s Cruise robotaxi business is latest growth initiative to falter
-
Nvidia falls into correction territory, down more than 10% from its record close
-
Family offices face hidden risks in making direct investments
Note: Every piece of content is rigorously reviewed by our team of experienced writers and editors to ensure its accuracy. Our writers use credible sources and adhere to strict fact-checking protocols to verify all claims and data before publication. If an error is identified, we promptly correct it and strive for transparency in all updates, feel free to reach out to us via email. We appreciate your trust and support!