Skift Take

A skeptic might say airlines are doing so well selling premium seats because their standard offering is getting worse. There's some truth to that. But airlines have also gotten better at targeting passengers with the right offers for them.

Editor's note: This series, called Airline Insiders, introduces readers to behind-the-scenes decision-makers for airlines. Unlike our ongoing airline CEO series, Future of the Passenger Experience, we will not question the highest-ranking executives here. Instead, we will speak with insiders who guide decisions on airline operations, networks, marketing, and the passenger experience. 

You can read all the stories in the series here.

We’re roughly halfway through airline earnings season, and since investors don’t like to hear executives complain about high fuel prices, many carriers have highlighted better news: Customers are paying big bucks for premium seats.

It’s not just flat-bed business class pods. Delta Air Lines reported earlier this month that all of its premium revenues, a group that encompasses international business class, premium economy, and extra-legroom seats, increased 19 percent in the third quarter, year-over-year.

United Airlines and JetBlue Airways had similar news, which is probably no surprise, as consumers feels flush, thanks to to a strong economy, and until recently, robust public markets. In September, the last month of the third quarter, U.S. consumer sentiment topped 100 on the University of Michigan’s index for the only third month since 2004.

This is not only an American phenomenon, nor simply a full-service airline development, as my colleague Patrick Whyte, Skift’s Europe Editor, explained this week. Whyte covered Ryanair’s earnings Tuesday, and noted the discounter improved ancillary revenues by 27 percent, mainly through improved sales of priority boarding and reserved seating. Amazingly, Ryanair CEO Michael O’Leary said the airline is “moving close” to selling nearly half of its passengers priority boarding. (Ryanair caps sales at 50 percent because otherwise, as O’Leary put it, it “wouldn’t be priority.”)

How long can this last? It’ll likely persist for a while. But if there’s a recession, more customers probably will be content in coach, even if legroom is less generous than a few years ago.

What do you think?

— Brian Sumers, Senior Aviation Business Editor [[email protected], @briansumers]

Best on Skift

JetBlue’s Battle to Remain Dominant in Boston: A few years ago, Delta Air Lines expanded in Seattle and tried to take share from Alaska Airlines. Surprisingly, Alaska has held on to most of its customers. Now, Delta is trying a similar strategy in Boston, where JetBlue has a big customer base. Will JetBlue’s loyalists stick around? Or will they defect to “Boston’s No. 1 global carrier?”

Ryanair Is Getting Better at Squeezing More Money Out of Flyers: Ryanair earnings call are rarely dull, and this was no exception. In addition to speaking about premium revenues, O’Leary also discussed Brexit, European consolidation, Ryanair’s airline’s plans for Laudamotion, the Austrian low-cost carrier in which it has a 75 percent stake. Whyte, our man in London, explains all in this story.

Qatar Air CEO Threatens the Airline Could Exit Oneworld ‘Soon:’ When my colleague Dennis Schaal agreed to sub for me at a meeting with Qatar Airways CEO Akbar Al Baker, I promised him he’d get a good story from the provocative airline head. Al Baker didn’t say anything that went viral — the last time I saw him in person, he made the quip about a woman being unable to run his airline — but he had harsh words for Oneworld and American Airlines. But does anyone think Al Baker actually will pull out of the alliance?

Why Viva Air Wants to Put Latin America’s Startups on the Map: Viva Air is far from South America’s largest airline group — it has fewer than 20 jets, spread between Peru and Colombia — but it is betting it can close the gap by focusing on digital strategy. Our Colombia-based freelancer, Kristin Majcher, explains what it all means.

United Airlines Avoids Fuel Cost Hit to Earnings With Higher Ticket Prices: United has been on a roll recently, at least with finances. The airline reported earnings last week, and the news was good, despite higher fuel costs. It was able to “recapture” nearly all of its increased costs through higher ticket prices, cost control, and growth.

Best of the Rest

JetBlue Keeps Hinting It Will Bring Its Mint Business Class to Europe: This story won’t go away. One day, it seems like JetBlue’s expansion into Europe is imminent. But another, the airline is walking it back, saying it wants to focus on adding the Airbus A220 to its fleet. What’s the real plan? It might be awhile until we know. But Bloomberg spent some time with JetBlue’s top management and learned the current skinny.

Why Lufthansa Should Keep Its Catering Arm: “Like twin crackers and cuboids of plastic-wrapped cheddar, airlines and in-flight caterers go better together,” Bloomberg columnist David Fickling writes in this interesting piece. I’m not sure I agree, but he argues Lufthansa Group — which may want to sell its catering division — might be wise to hold on it. Why? “Selling rubbery chicken sausage and scrambled-egg breakfasts is a lot less at the mercy of volatile commodity prices” than the overall airline business, he writes.

This Is a Golden Age for First Class Airline Travel: Bloomberg contributor Eric Rosen gets it right. Many airlines are reducing or eliminating first class, saying it’s not a major moneymaker except in the biggest cities. But the airlines that are keeping it — Lufthansa, Singapore Airlines and Emirates among them — are investing in their product, and in most cases, it’s darn impressive. If you can afford it, international first class is often a top-notch product.

Details About Alaska Airlines’ New Basic Economy Fares: Chris McGinnis and Tim Jue of SF Gate have details on Alaska’s new no-frills fares, and the news is generally passenger friendly. Customers may bring a big carry-on, and they’ll earn elite qualifying miles in Alaska’ frequent flyer program. They’ll also have a chance to buy up to better seats, but if they choose not to, Alaska will assign them seats. Alaska won’t guarantee families they can sit together, McGinnis and Jue report.

Listen to my Podcast!

You probably know by now Skift recently acquired Airline Weekly, an aviation-focused newsletter. This has been fun for me, because I can now talk about the business with my newest colleagues: Seth Kaplan, Jason Cottrell, and Jay Shabat.

Earlier this month, Seth and I recorded a podcast about the future of low-cost airlines. We’re bullish on short-haul carriers. But we’re both skeptical about long-haul carriers, including Norwegian.


You should listen. 

Also, a big thank you to Skift News Editor Hannah Sampson for producing the podcast.

Contact Me

Skift Senior Aviation Business Editor Brian Sumers [[email protected]] curates the Skift Airline Innovation Report. Skift emails the newsletter every Wednesday. Have a story idea? Or a juicy news tip? Want to share a memo? Send him an email or tweet him.


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Tags: airline innovation report, delta air lines, united airlines

Photo credit: Ryanair is not known as a premium airline, but it is increasing selling slightly better products to its customers, and making a big margin in the process. Pictured is a Boeing 737 aircraft. Ryanair

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