Airlines

Airlines Fight for First- and Business-Class Passengers


Airlines Fight for First- and Business-Class Passengers

Photograph by Ed Pritchard/Getty Images

When Hal Biagas travels cross-country on business, you won’t find him wedged in a middle seat back in row 28. It’s not fancy meals or free bags that make premium-class travel a must for Biagas, general counsel at Excel Sports Management, which represents A-listers such as Tiger Woods and the Yankees’ Derek Jeter. “What I do tends to draw interest,” Biagas says, “and I can’t have someone looking over my shoulder and seeing a name on a presentation or contract.”

Just as Asian and Middle Eastern airlines have built lucrative businesses serving executives and the wealthy, U.S. carriers have intensified competition for full-fare passengers who frequently travel between New York and Los Angeles. The contest for first- and business-class fliers on the heavily traveled route is pitting American Airlines (with 32 percent of the market), Virgin America (21 percent), Delta Air Lines (DAL) (19 percent), United Airlines (UAL) (16 percent), and JetBlue Airways (JBLU) (11 percent) against each other in a battle for investment bankers, celebrities, and others who can afford tickets topping $6,500. Although coach fliers are a majority on almost all trips, Michael Boyd, chairman of consultant Boyd Group International, estimates premium-class passengers account for 75 percent of the revenue on cross-country flights. “Pandering to business traffic is a lot more important than getting volume,” Boyd says.

New York-Los Angeles is both the busiest long-haul U.S. route, with about 3.2 million passengers a year, and the most lucrative, with $1.43 billion in annual sales, according to the Bureau of Transportation Statistics. A premium-cabin ticket can cost 10 times more than one in coach—but passengers do get plenty of pampering. At American, concierge employees greet first-class fliers at curbside and whisk them to a special transcontinental check-in room. They’re then taken to the front of the security line and the Flagship Lounge, a private facility within American’s Admirals Clubs. Once airborne on Delta, business/first passengers are plied with Veuve du Vernay Brut sparkling wine from France’s Bordeaux region, along with premium California offerings such as Merry Edwards sauvignon blanc. “That transcon market is incredibly important, because it helps you become the preferred carrier across the board,” says Gail Grimmett, Delta’s senior vice president for New York.

Lie-flat seats are the latest front in the New York-L.A. war. Delta is shifting some wide-body Boeing (BA) 767s with flat-bed seats from trans-Atlantic to cross-country service and adding flat-bed seats on existing narrow-body 757s on the routes. United is rearranging its cabins to go to two classes of service from three; as part of the makeover it will lose 12 seats that tilt to not-quite-horizontal on its cross-country 757s to make room for a total of 28 lie-flat seats.

In November, American will start flying Airbus (EAD:FP) A321 single-aisle jets specially modified for transcon service. They’ll have 10 mini-suites with flat-bed seats, 20 fully flat business-class seats, 36 coach seats with extra legroom that sell for an added fee, and only 36 traditional coach seats. Explains American’s chief commercial officer, Virasb Vahidi: “You can tell quickly that this aircraft was not configured for leisure travelers.”

The bottom line: Airlines are fighting over full-fare passengers on New York-Los Angeles flights, which draw 3.2 million travelers a year.

Credeur is a reporter for Bloomberg News.
Schlangenstein is a reporter for Bloomberg News in Dallas.

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Companies Mentioned

  • DAL
    (Delta Air Lines Inc)
    • $38.64 USD
    • -0.80
    • -2.07%
  • UAL
    (United Continental Holdings Inc)
    • $49.38 USD
    • -0.52
    • -1.05%
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