Over time, we’ve seen the concept of “basic economy” become pretty widespread, whereby the cheapest economy fares include the fewest perks. The purpose of this is twofold — to expand a carrier’s potential customer base, and to get existing customers to “buy up” to a higher fare, in order to avoid punitive restrictions.
Internationally, we’ve also seen some airlines introduce basic business class. Up until now, it’s not really a concept we’ve seen at one of the “big three” US airlines. Could that change, though?
In this post:
Delta appears to be planning a basic business class
Over the past several months, we’ve received a couple of hints that Delta may be planning an unbundled business class product. As flagged by View from the Wing, during the Q2 2024 Delta earnings call, JP Morgan Analyst Jamie Baker asked the following question:
“This concept of unbundling the front cabin is one that I’ve been thinking about in part because unbundling and segmenting the rear cabin has been such a success for Delta and a few others. I want to be careful about asking about future pricing and all that, but I’m curious what the pros and cons are in terms of possibly going down this path, or is one price for all how we should continue to think about the D1 cabin?”
Delta President Glen Hauenstein responded with the following:
“We’ve talked conceptually about that. I think we’ll be giving you more details as we go, but we’re not ready to talk about the details of those plans moving forward. I think the investor day this year should be very exciting.”
Then during the Q3 2024 earnings call, Hauenstein was asked about if premium revenue can continue to grow, to which he answered the following:
“But we also think there’s more to go on the premium products. And I think not to keep harping in on saying, come next month and join us for our Investor Day. But I think we’ll be able to unveil why and how we think those can continue to improve over the medium and long term.”
So while we’ll see how this plays out, it seems pretty clear that unbundling business class is something that Delta is working on, though it remains to be seen how imminent the implementation is.
Outside the United States, there are quite a few airlines that have unbundled business class, ranging from Emirates, to Finnair, to Qatar Airways. In general, I would expect unbundled business class could include some of the following restrictions, based on the precedent we’ve seen at other airlines:
- Fees on seat assignments
- Fees to change tickets
- No lounge access or restricted lounge access
- Restrictions on priority check-in, priority security, and priority boarding
My take on Delta unbundling business class
Since the start of the pandemic, we’ve seen strong leisure demand for premium cabin travel, while business travel hasn’t fully recovered. This combination is a double-edged sword — it’s easier to fill premium cabins, but airlines aren’t seeing as many of the super expensive premium fares as they saw before the pandemic.
I would think that Delta’s primary goal with unbundling business class would be to get people to buy up to more expensive premium fares to avoid certain restrictions. I know airlines try to market unbundling as intending to offer a better value option to more travelers, though in reality I suspect the cheapest current fares would simply become the new “basic” fares, where fewer perks are included than now. So consumers likely wouldn’t come out ahead.
Personally I think the most logical implementation of an unbundled premium cabin would be in domestic first class, at least to start. I hate to say it, but this could be a way for Delta to reimpose change fees on tickets, by making these tickets not changeable or cancelable without paying a fee. Maybe the airline wouldn’t include seat assignments in advance for non-elite members, or something, but I wouldn’t expect it to be too draconian beyond that.
Unbundling business class on long haul flights is a bit trickier, as it’s a coordinated effort. That’s because so many long haul markets are dominated by joint ventures, which coordinate fares, schedules, and restrictions. Delta has a joint venture with Air France-KLM and Virgin Atlantic across the Atlantic, and with Korean Air across the Pacific, so we’d likely see this implemented on a wider scale.
In addition to the potential above restrictions, I wonder if we could maybe see the airline offer Delta Sky Club access on basic business class tickets, while restricting Delta One Lounge access to non-basic business class tickets.
Keep in mind that Air France-KLM have already added seat assignment fees in business class in many markets, and in some ways, perhaps that’s one form of unbundling business class. I mean, I guess by that criteria, British Airways’ business class has been unbundled for a very long time.
Bottom line
While nothing is official, Delta appears to have plans to announce an unbundled business class product in the near future. We’ve seen the concept of basic business class at some foreign carriers, and you can expect that this will include restrictions related to change fees, seat assignments, priority services, etc.
Personally I think Delta is most likely to use this as a way to reimpose change fees on many premium tickets, in order to get people to book more expensive fares. I also think it’s safe to say that if Delta does go this direction, American and United will almost certainly follow.
So for now we’ll mark this as “developing,” but it’s something to keep an eye out for…
What do you make of the prospect of Delta unbundling business class?
What about no free bags?
I still think given the joint venture this will probably be after the KA merger is done just to ensure there's not issues with that.
I keep Kosher, I'm a vegetarian, I don't drink alcohol, and I travel with carry-on only. I don't need everything that a business class seat comes with. I just want to lay flat on overnight flights and would love to pay extra just to lay flat, like Air New Zealand's sky couch. I'd love an unbundled business class ticket with a lay-flat seat on overnight flights and would be happy to pay $150 to $300 extra for the seat only.
Does this seem a little risky?
People tend to get excited about the perks like nice lounges or premium fast lanes but I wonder what the effect of putting a hard-dollar price on them would be. Sure, it's nice to have the Polaris lounge, but it's not really space or dining you would think is that great--or would go out of your way to patronize in everyday life--if you weren't getting it as what people...
Does this seem a little risky?
People tend to get excited about the perks like nice lounges or premium fast lanes but I wonder what the effect of putting a hard-dollar price on them would be. Sure, it's nice to have the Polaris lounge, but it's not really space or dining you would think is that great--or would go out of your way to patronize in everyday life--if you weren't getting it as what people perceive as a complimentary extra with your ticket.
So if you really confronted people with the cost--unless it was pretty marginal--wouldn't a lot of people buy the basic fare and not buy up for the full package? "What the heck--for that price I'll just grab something quick at Starbucks and get on board."
As you have said, business class is really "all about the seat." I question how much fare differentiation the market can tolerate.
As long as frequent flyers could still earn MQDs on basic business, there’s definitely a price where most people would do it IMO since it’s still a flat bed on a long-haul flight.
The success of basic economy is creating a product that corporate travel departments will not buy. The lack of flexibility /changability is the key reason why. I think a non-changeable business class fare will help differentiate business and leisure traveller's fares.
The challenge with unbundling is you are mostly competing with price and product. Business traveller's will choose the bundled vs unbundled option unless there is something compelling. Loyalty can be one but with lower...
The success of basic economy is creating a product that corporate travel departments will not buy. The lack of flexibility /changability is the key reason why. I think a non-changeable business class fare will help differentiate business and leisure traveller's fares.
The challenge with unbundling is you are mostly competing with price and product. Business traveller's will choose the bundled vs unbundled option unless there is something compelling. Loyalty can be one but with lower domestic upgrades it's less of a carrot than before. I think business plus seating (bulkhead seats with more room) and elevated lounge access could be loyalty drivers. Upgrade certificates for domestic trips are another - but availability to use becomes a key determination of value.
Hopefully all we see is restricting lounge access and/or seat assignment fees. It would be a huge bummer if change fees come back - but given the huge deal they (big 3) made out of eliminating change fees four years ago, I think (hope) it’s too soon to re-neg that
I don't fly AFKL because of this. It's not that I mind the bundled price, but being presented a lower price and then asked to actually pay 200€ extra to get the basic business class features always pisses me off so much than I end up booking something else, even if it's more expensive. I'm fine playing these games in economy, but when buying a premium product, being reminded that the airline takes me for a fool is not helpful (or maybe it is, for me).
I think a lot of the motivation is the transatlantic JV- as you mention, AF already unbundles business class (not just seat assignments, but change fees and lounge access) on some long haul routes, but hasn’t been able to do so in the US market because of the JV aligning fares and policies.
There’s two things that will probably happen: re-integration of change fees and some sort of reduced mileage earning.
They are going to try to prevent business travelers from wanting these tickets.
In long haul with direct aisle access for every seat, the seat assignment thing isn’t that big of a deal. Yes, flying as a couple or near bathrooms are issues but no seat assignment isn’t the same as basic economy.
other airlines outside of the DL JVs have done it and so there is a history that they work at some level.
DL is adding business class seats with its ex-Latam A350 conversions - with the new A350-900s getting the same configuration (or vice versa).
DL has clearly done the math to see that they can sell more D1 seats at lower revenue than DL but still more than the extra space that a premium...
other airlines outside of the DL JVs have done it and so there is a history that they work at some level.
DL is adding business class seats with its ex-Latam A350 conversions - with the new A350-900s getting the same configuration (or vice versa).
DL has clearly done the math to see that they can sell more D1 seats at lower revenue than DL but still more than the extra space that a premium economy seat takes up (they are reducing the number of Premium Select seats compared to their original A350-900s).
The real target could well be AA and UA that have much larger business class cabins on several fleet types.
If AA and UA are able to make far fewer business class tickets available for loyalty program upgrades because they monetize them at lower rates, DL might be better able to grow in competitive markets.
Will be interesting to watch but DL is going to be growing its Delta One capacity significantly over the next few years so those seats will be filled somehow