High-spending vacationers are leading a boom in first- and business-class flight bookings, leading major airlines to bet on a new era of luxury travel by investing in their cabins and lounges.
Lufthansa said this month that the “strongest demand” for travel this year was in its premium cabin, with leisure travelers “almost fully making up” for a slow recovery in corporate bookings.
Carsten Spohr, the airline’s chief executive, said he expected a “permanent shift” with holidaymakers occupying business and first-class seats, drawing comparisons to the recent boom in luxury goods such as cars, watches and prime real estate.
“This is the first year all my teams have told me that we need to be top-notch. . . I never thought I’d hear something like that,” Spohr said on the earnings call.
Air France-KLM chief executive Ben Smith said his airline group was investing to meet demand from high-end leisure travellers, particularly for flights to Paris, and was “more than making up” for the drop in business travel.
Airlines are looking to capitalize on relentless demand for luxury goods and experiences, which rebounded quickly after the Covid-19 lockdowns in 2020.
“(It’s not just) us: Ask the same question for luxury hotels and corporates . . . the whole industry is doing really well,” Smith told analysts on the airline’s earnings call.
The strong dollar is helping to drive demand for U.S. transatlantic tourists, which is making up for the slow return of normally high-spending Chinese tourists, the airline added.
First and business class travel is recovering faster than total passenger traffic, according to global airline body Iata.
In February, the latest month for which data is available, premium ridership was at 86% of 2019 levels, compared with an industry-wide total of 81%.
In the U.S., the big three airlines told investors last month that passengers were eager to book seats at the front of the plane. American Airlines said revenue from premium seats rose 20% and accounted for a higher percentage in the first quarter compared with 2019. “Most of our growth right now is leaning toward premium seats,” said Gerald Rudman, United’s chief financial officer.
The surge in high-end travel comes as rising inflation has hit household budgets more broadly, including in Europe, raising questions about whether overall demand for flying is sustainable.
However, Delta Air Lines President Glen Hauenstein predicts this trend will continue. “Once you start flying in these cabins, you tend not to go back.”
Gulf carrier Etihad became the latest airline to announce a major investment in its premium product, launching new business class suites last week. Lufthansa has embarked on a 2.5 billion euro overhaul of its long-haul cabin, including a new first-class seat, while U.S. airline Delta has pledged to install premium seating on all of its planes by this summer. Earlier this year, Qantas announced a $100 million investment in its lounges.
Rob Burgess, editor of frequent flyer website Head for Points, said leisure travelers want a different flying experience than corporate customers, who typically value privacy and sleep.
He said airlines needed to focus more on their “soft products”, including food and in-flight entertainment, to cater to holidaymakers, and questioned whether the trend towards more privacy, such as suites with doors, would attract friends and The family travels together.
“Business travelers have very low requirements for value and soft products, as long as they can get a good night’s sleep and run up frequent flyer miles and membership points. The leisure market doesn’t work like that,” Burgess said.
Nigel Goode, chairman of aircraft interiors designer PriestmanGoode, said demand from airline customers was “really picking up”.
He said airlines focused on designing cabins that appealed to a younger generation of travelers were seeing a shift in cabin design to be as “luxurious” as possible.
“The new generation will want something different.”