Is business the new first class?

For an increasing number of corporates and even airlines, the economics of first class travel just isn’t adding up. The cost efficiency and new level of luxury offered by business class is changing aircraft configuration for the long term.

As early as December 2017 CAPA - Centre for Aviation, posed the question - is first class airline travel dead? The question followed the news that United Airlines was doing away with long-haul first class, and that Lufthansa was not incorporating a first class cabin on its 777X fleet.

CAPA is one of the most trusted sources of airline and aviation market intelligence in the industry and it’s now clear that they were onto something. Tightening corporate travel budgets and innovation in the design of business class cabins, have increasingly been closing the gap between first and business class in the past three years or so.

While travelling first class might be a reward for some business travellers, and a status symbol for others, it also comes with a hefty price tag that can be up to 10 times the cost of an economy fare - and three to six times the cost of premium economy or business class.

While many will argue that business class – with a lie flat seat - is worth the extra cost versus economy (especially when you have to hit the ground running), it’s getting harder for companies to justify the extra cost of first class versus business class.

CAPA has reported that as corporate and government travel policies are changing, first class passenger numbers are evaporating and many companies now rarely allow first class travel even for the most senior executives. Instead business class, has become the new first class.

In the academic and education sector Campus Travel Regional General Manager, Kristy Fennell-Higgs admits that first class travel has only ever been available to very few travellers, such as senior university executives. “In recent years many clients have been tightening their belts and this has been reflected in an increased use of premium economy fares over business class for flights under five hours,” said Kristy. “The budget conscious academic sector is attuned to squeezing the most out of their funding dollars and economy travel is often the norm – with travellers using frequent flyers points to upgrade themselves if they want a bit more luxury.”

Similarly Shelley Poten, Regional General Manager – FCM Travel Solutions QLD,  said that “over the past five years FCM had definitely noticed a shift away from clients travelling first class”.

FCM Travel Solutions and Campus Travel both sit within Flight Centre Travel Group’s corporate division.

“More corporates are mandating business class fares on flights over eight hours, while also utilising premium economy where it is available,” Shelley said. “And less than 5% of fares booked for their corporate clients are first class and these are predominantly for senior executives in the legal, financial and pharmaceutical sectors.”

The reality is that business class is increasingly offering a level of comfort and service that was once only reserved for first class – including flat beds, privacy pods, superior entertainment, fine wine and food, priority check-in, boarding and disembarking, and dedicated airport lounges.

As a result, the number of first class seats on airlines around the world is falling, as new planes are being configured to include less first class suites (or in some cases no first class) and more business class seats. In November 2017 business news network CNBC reported that a number of airlines, including Delta and United, were adopting business class cabins with ‘first class like’ pods for working travellers. The trend across the industry has turned to focusing on attracting more frequent repeat business travellers to fill airline seats, while reducing or forgoing first class.

Aviation data consultancy OAG, has also weighed in to the debate acknowledging that the number of first class seats is shrinking in most parts of the world. It says between 2014 and 2017, first class capacity has fallen 7.3% in western Europe, and 23.6% in North America. While company budgets are driving this trend, so are the airlines themselves as they look to dedicate more aircraft space to the more lucrative returns provided by regular business travellers.

In 2017 Randy Tinseth, vice-president of marketing for Boeing Commercial said, “we are finding that first class is going away in more and more markets. Airlines are becoming smarter about ways to provide business-class services using a smaller footprint. It is all about square footage and finding ways to maximise the revenues”.

A number of the airlines that do offer first class are restricting it to only certain flights, while for others, keeping a few first class cabins is designed purely for aspirational marketing purposes to generate interest and news worthy content. However middle-eastern airlines including Emirates, Etihad and Qatar report that first class remains an important segment for them, so they are likely to continue investing in first class – as least for now.