I don’t think there’s anything here that’s going to shock regular OMAAT readers, but sometimes it’s nice to have concepts broken down in a simple way that anyone can understand, even if they don’t follow the industry closely…
Why airlines like Air France are investing in first class
The Wall Street Journal has been producing some great video content lately, explaining various aspects of the airline industry. For example, I recently covered the hidden airport design tricks that airports use to guide travelers.
A new roughly seven minute video has just been published, about how some airlines are investing billions in first class. We know that we’ve seen a huge increase in premium cabin demand for long haul flights, though that has largely been about increased business class demand. Airlines largely differ on the concept of long haul first class — some airlines think that there’s no future for first class, while other airlines continue to see a lucrative market for this.
So the below video from The Wall Street Journal does a great job breaking down why airlines like Air France are investing in the product, with Air France having recently rolled out its new La Premiere first class. The video also has some comments from Air France-KLM CEO Ben Smith (and Air France SVP of Customer Experience, Fabien Pelous, giving a tour of the seat).
Like I said, there’s nothing shocking here, but several things stand out:
- I think many people don’t realize how long the process of introducing a new seat takes; Smith shares that the process of designing the new La Premiere cabin took around six years, including over three years for testing and certifying (and let’s not even talk about what’s going on in Germany, in terms of timeline) 😉
- The challenge with investing in new premium products is that you’re taking a gamble based on where you think demand will be several years down the road, since the introduction of these products is far from instant
- In the case of Air France, many people booking La Premiere would otherwise fly private, and some travelers apparently even buy the whole cabin just for themselves, since it’s more economical and (arguably comfortable) than flying private
- The goal for many airlines is to operate smaller and more fuel efficient aircraft over time, so that there’s less reliance on connecting economy passengers, where the margins just aren’t very good; by increasing the size of premium cabins, there’s also less reliance on connecting economy passengers
Anyway, if you have a little bit of time, I’d highly recommend watching the below video.
Air France has a unique market position for first class
Of course it’s worth emphasizing that not all airlines take the same approach as Air France. Quite to the contrary, we’ve seen a lot of airlines eliminate first class, in favor of investing in business class and premium economy:
- As business class keeps getting better, many airline executives argue that there’s less need for first class
- Many airline executives claim that premium economy is the most profitable cabin per square foot
So I totally understand why many airlines have eliminated first class. However, airlines like Air France, Emirates, and SWISS, continue to invest in first class.
I do think it’s worth calling out that Air France has a unique market position. With its first class, Air France is primarily targeting passengers who are traveling to or from Paris, so the airline isn’t going after connecting passengers, like you might find on Emirates (not that Dubai doesn’t have first class demand).
Paris is probably the single market in the world that has the most wealthy leisure travelers, as it’s a place that people from around the world flock to. That’s also why Air France has really tried to position itself in a different league than any other airline when it comes to first class, in terms of both pricing and exclusivity of ground services.
The airline has very small first class cabins (with just four seats), and also only offers first class in key markets. So far, the strategy seems to be working. I think the other thing worth emphasizing is just how efficiently Air France was able to introduce its new first class. Is it over the top? Yes.
But Air France’s 777-300ERs are getting a tip-to-tail makeover, whereby the airline is increasing the seat count, all while introducing a new first class, more business class seats, and more premium economy seats. Air France should win some sort of a LOPA efficiency award for how it reconfigured these jets, because it’s a masterclass in maximizing revenue.
Bottom line
Airlines differ about whether there’s a future for first class or not. Airlines like Air France are investing a lot of money and are betting big on it, and I think it’s cool to understand why. I love these kinds of videos from The Wall Street Journal, and hope we see more.
What do you make of this bet on first class?
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