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High-spending holidaymakers fill airlines’ first-class and business seats

High-spending holidaymakers are spearheading 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 “very strongest demand” for travel this year had been in its premium cabins and that leisure travellers had “almost completely compensated” for the slower return of corporate bookings. The airline’s chief executive Carsten Spohr said he expected a “permanent shift” towards holidaymakers filling business and first-class seats, as he drew comparisons with the recent boom enjoyed by luxury sectors including cars, watches and prime property.

“This year is the first year all my team tells me we need to grow first class . . . I never thought I would ever hear that,” Spohr said on an earnings call. Ben Smith, chief executive of Air France-KLM, said his airline group was investing to keep up with demand from high-end leisure travellers, particularly for flights to Paris, and was “more than making up” for the reduction in corporate travel.

Airlines are hoping to tap into relentless demand for luxury goods and experiences, which has rebounded rapidly following Covid-19 lockdowns in 2020. “[It is] not just us: ask the same question of luxury hotels and business . . . the whole sector is doing extremely well,” Smith told analysts on the airline’s results call.

A strong dollar was helping to drive demand from US transatlantic travellers, which was making up for the slow return of typically high-spending Chinese tourists, airlines added.

Travel in first and business-class cabins has recovered faster than total passenger traffic, according to global airlines body Iata.

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

In the US, the three largest carriers 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 per cent in the first quarter compared with 2019, and it filled a higher percentage of them. United Airlines chief financial officer Gerald Laderman said that “most of our growth is tilted towards premium seating at this point”.

The surge in high-end travel comes when rising inflation has bitten into household budgets more broadly, including in Europe, which has raised questions over whether overall demand for flying is sustainable. However, Delta Air Lines president Glen Hauenstein predicted the trend would last. “Once you start flying in those cabins, you tend not to go back.”

Gulf carrier Etihad became 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 €2.5bn 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 aircraft by this summer.

Australia’s Qantas announced $100mn investment in its lounges earlier this year. Rob Burgess, editor of frequent flyer website Head for Points, said leisure travellers expected a different experience when flying compared with corporate customers, who typically value privacy and sleep.

He said airlines would need to focus more on their “soft product”, including food and in-flight entertainment, to meet the needs of holidaymakers, and questioned whether the trend towards greater privacy, such as suites with doors, appealed to friends and families travelling together. “Business travellers are very undemanding in terms of value and soft product as long as they can sleep, and run up their frequent flyer miles and status points. The leisure market doesn’t work like this,” Burgess said.

Nigel Goode, chair of aircraft interior designers PriestmanGoode, said demand from airline clients was “really picking up”. He said airlines were focused on designing cabins that appealed to a younger generation of travellers, and they had detected a shift away from cabins designed to appear as “opulent” as possible. “New generations are going to want something different.”

This article originally appeared on the Financial Times

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