The Premium Boom Continues: The Race is On to Grow Short-Haul Opportunity

As we discussed yesterday, in the long-haul market, premium upsell options have long been part of the game, but in the short-haul market, that has not been the case. It wasn’t all that long ago that airlines almost exclusively sold coach seats. Most of those people sitting in First Class were upgrades. This has changed dramatically, and the announcements of expanded premium offerings just keep coming.

Think back to the dawn of the millennium. United had introduced its Economy Plus extra legroom cabin… primarily as an upgrade opportunity for elite members of Mileage Plus. Sure, if you bought full-fare coach you could sit up there, and eventually there was a subscription product for travelers to buy that would work any time they flew. But this wasn’t really thought of as a direct revenue generator. It was about creating loyalty stickiness.

American lost its mind when it responded with More Room Throughout Coach. It gave everyone extra legroom instead of a small sub-section, but the airline quickly found out that few were willing to pay a higher fare to get that extra legroom. It was a dramatic failure, but it wasn’t just American. United was ready to write off Economy Plus as well until it decided to give it a go and make some money on the cabin. It has never looked back, despite a close call with stupidity after the Continental merger, as I understand it.

Today, all of the biggest US carriers (with one LUVable, glaring exception) have an extra legroom section, and the cabins just keep growing. To illustrate this, let’s take a look at the breakdown of seats across the short-haul fleet for several US airlines:

% of Long-Haul Fleet With Upsell Opportunity

As with the long-haul fleet, United is the champion of short-haul upsell. It’s actually rather remarkable just how much bigger the Economy Plus section is compared to extra legroom sections on the others. Delta comes next on the strength of the largest domestic First Class section in the group.

JetBlue also has a very large extra legroom section, but that makes up for the fact that it has no domestic First Class… yet. Spirit, meanwhile, has its Big Front Seat which I categorized under domestic First Class, and it has exit rows. Frontier has its own extra legroom section which is now morphing into something more.

The real outlier here is, yes, Southwest. Sure, it can sell EarlyBird boarding to get people on the plane earlier, but it has no mechanism to sell extra legroom seats, nor does it have a domestic First Class. It is leaving big money on the table, which would explain why I and many others have speculated that at the very least, an extra legroom seating section will be rolled out at the airline’s investor day in September.

While we all wait to hear what Southwest is doing, other airlines are taking swift action to improve their revenue-generating opportunities. Here’s a look at some of what has been announced (or rumored) in just the last few months.

Frontier converted the first two rows from an extra legroom section to a European-style business class called UpFront Plus, meaning the middle seat is blocked. American is adding 4 First Class seats to 133 A319s (increase from 8 to 12) and 48 A320s (increase from 12 to 16). Alaska is adding 4 First Class seats to its 59 737-800s (from 12 to 16) and 6 extra legroom seats on its 79 737-900ERs and 80 MAX 9 aircraft. This increases its premium upsell opportunity from 25.4 percent of seats to over 27 percent. JetBlue is rumored to be planning to add a domestic First Class cabin, but this is unconfirmed.

Considering how airlines now sell tickets in bundles or with ancillary add-ons, it makes sense to create more and more upsell opportunities. They do pay for themselves quickly… at least now they do. But will that always be the case? It would seem that there will always be some appetite for something better than regular coach, but it’s also not hard to imagine that the airlines will overshoot on this and end up putting too many seats out there.

Worst case, of course, we’re right back where United started 25 years ago with Economy Plus. If there are too many extra legroom or First Class seats, upgrades are always an option to please your best travelers. Maybe after all these years, loyalty stickiness will come back around again.

Or not. This is about generating direct revenue, and right now, everybody seems pretty bullish on the idea.

The Premium Boom Continues: The Race is On to Grow Short-Haul Opportunity

The Premium Boom Continues: The Race is On to Grow Short-Haul Opportunity

The Premium Boom Continues: The Race is On to Grow Short-Haul Opportunity

The Premium Boom Continues: The Race is On to Grow Short-Haul Opportunity

The Premium Boom Continues: The Race is On to Grow Short-Haul Opportunity