Airlines have used first class to reward its best business customers with upgrades, but they're realizing it's not a perk they can justify; plus, they need more space for paying business-class customers.
Deutsche Lufthansa AG will reduce the proportion of long-haul planes with first-class seats to 75 percent, responding to waning demand for airfare tickets that can command the price of a small car.
Lufthansa now has top-end cabins in more than 90 percent of its wide-body fleet, Chief Executive Officer Christoph Franz said in an interview. Some will disappear from the Airbus SAS A340-300 this year and Boeing Co. 747-400s in 2014. Destinations set to lose the first-class option include Vancouver, for which a return ticket next week costs 10,020 euros ($13,400).
“They’ll serve routes where there is simply no more demand for first class,” Franz said in Berlin. “We’re a little bit exotic here — we had first class seats on 94 of our 100 long- haul planes. Others thought we were mad.”
Lufthansa’s retreat will leave it with a lower proportion of first class-equipped planes than British Airways, which says the service is available in 80 percent of the long-haul fleet. Franz said he’s also reluctant to lose too many economy seats as flat beds are added to its business cabins for the first time.
Shares of Lufthansa fell as much as 1.5 percent and were trading 0.3 percent lower as of 3:55 p.m. in Frankfurt.
The healthiest first-class routes include Frankfurt to Kuwait, Johannesburg, Riyadh and Miami, Lufthansa spokesman Michael Lamberty said. Carsten Spohr, who heads the passenger airline business, told employees in a letter last year that the company planned to scrap its first-class product to some cities.
Cologne-based Lufthansa is half way through a 300 million- euro overhaul of first class. The plan covers installing the seats in new Boeing 747-8s and Airbus A380s, upgrading first- class cabins in planes such as newer 747-400s, and fitting them in some A340s and A330s that don’t yet offer luxury service.
Lufthansa said this week that it plans to purchase 108 new aircraft worth 9 billion euros ($12 billion), including eight wide-body jets, a requirement that must be approved by its supervisory board. The long-haul planes are likely to be two more A380s plus six Boeing 777s, with the latter to be used by Swiss International Air Lines Ltd., Sueddeutsche Zeitung reported today, without saying where it got the information.
Lufthansa’s next order decision after that will concern planes to replace older Airbus A340s, with Boeing’s 787 and the Airbus A350 in the running, according to spokesman Thomas Jachnow, who said a resolution is likely before the year’s end.
British Airways operates 112 long-haul planes, 90 of them featuring a first-class setup, according to spokesman Michael Johnson. The London-based unit of International Consolidated Airlines Group SA has added six Boeing 777-300s in the past two years, all with first class, slightly increasing the proportion.
Air France offers the luxury berths in only 40 percent of its 100 or so wide-bodies following a decision in 2010 to drop them from some Boeing 777 twin-jets and boost economy seating.
Franz said that Lufthansa will also limit the number of economy-class rows removed to make way for flat-bed business berths, avoiding the loss of too much space in coach.
While boasting the largest business-class offering in the industry, according to the CEO, the carrier is relatively late in introducing the seats, which debuted June 1 on a 747-8. BA installed the world’s first flat business seats in 2000.
“A flat bed needs more space than older seats, so it’s a question of optimization,” Franz said. “We need to be extremely careful. We must make sure our seat design takes up a lot less extra space compared to rivals as our business class is so much larger. You need to save some space for economy.”
Lufthansa generated 50.4 percent of its long-haul revenue from first- and business-class passengers in 2011. That figure slipped to 49.3 percent in the first nine months of 2012.
The airline is also adding its first premium-economy seats across the long-haul fleet in a move announced in December.
With assistance from Kari Lundgren and Robert Wall in London and Andrea Rothman in Toulouse. Editors: Chris Jasper, Benedikt Kammel. To contact the reporter on this story: Richard Weiss in Frankfurt at firstname.lastname@example.org. To contact the editor responsible for this story: Benedikt Kammel at email@example.com.
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Photo Credit: A passenger in the new Lufthansa business class, which is replacing first class on some planes. Lufthansa