High-spending vacationers occupy first-class and business-class airline seats

High-spend vacationers are driving a boom in first-class and business-class flight bookings, leading big airlines to bet on a new era of luxury travel with investments in their cabins and lounges.

Lufthansa this month said the “much stronger demand” for travel this year has been in its premium cabins, and leisure travelers have “almost completely compensated” for the slower return on corporate bookings.

The airline’s chief executive, Carsten Spohr, said he expected a “permanent shift” towards holidaymakers taking up business and first class seats, drawing comparisons with the recent boom enjoyed by luxury sectors, including cars. , watches and prime real estate.

“This year is the first year that my whole team tells me that we have to grow in first class. . . I never thought I’d ever hear that,” Spohr said in an earnings call.

Ben Smith, chief executive of Air France-KLM, said his group of airlines is investing to keep pace with demand from high-end leisure travellers, particularly for flights to Paris, and is “more than offsetting ” the reduction of corporate travel.

Airline companies they hope to tap into the unstoppable demand for luxury goods and experiences, which rebounded rapidly after the Covid lockdowns in 2020.

“[It is] not just us: ask the same question of luxury hotels and businesses. . . the whole industry is doing very well,” Smith told analysts on the airline’s results call.

A strong dollar was helping to boost demand from U.S. transatlantic travelers, offsetting the slow return of typically high-spending Chinese tourists, the airlines added.

Travel in first and business class cabins have recovered faster than total passenger traffic, according to the global airline body IATA.

Premium passenger numbers reached 86% of 2019 levels in February, the most recent month for which data is available, compared to an industry-wide total of 81%.

In the United States, the three biggest carriers told investors last month that passengers were eager to reserve seats at the front of the plane. American Airlines said revenue from premium seats increased 20% in the first quarter compared to 2019 and filled a higher percentage of them. United Airlines chief financial officer Gerald Laderman said that “most of our growth is geared toward premium seating at this point.”

The surge in luxury travel comes at a time when rising inflation has hit household budgets more broadly, including in Europe, which has raised questions about the sustainability of overall demand for flights.

However, Delta Air Lines president Glen Hauenstein predicted the trend would last. “Once you start flying those cabins, you tend not to go back,” he said.

Gulf-based airline Etihad, has become the latest airline to announce a significant investment in its premium product, launching a new business class suite last week. Lufthansa has embarked on a €2.5 billion overhaul of its long-haul cabins, including a new first-class seat, while US carrier Delta has pledged to fit premium seats on all its planes by the summer. Australia’s Qantas announced a $100 million investment in its lounges earlier this year.

Rob Burgess, editor of frequent flyer website Head for Points, said leisure travelers expect a different in-flight experience than corporate customers, who typically value privacy and sleep.

He said airlines should focus more on their “soft product,” including in-flight food and entertainment, to meet the needs of vacationers, and questioned whether the trend toward more privacy, such as suites with doors, suitable friends and families traveling together.

“Business travelers are very undemanding in terms of value and soft products as long as they can sleep and accumulate frequent flyer miles and status points. The leisure market doesn’t work like that,” Burgess said.

Nigel Goode, president of PriestmanGoode aircraft interior designers, said demand from airline customers was “really picking up”.

He said airlines have focused on designing cabins that appeal to a younger generation of travelers and have detected a move away from cabins designed to look as “opulent” as possible.

“The new generations will want something different,” she said.