International travel returns give birth to war for high-cost passengers

A Singapore Airlines A380 first class suite

Leslie Josephus | CNBC

Singapore Airlines unveiled its highest offer in the United States this week: a first-class suite with a bed, a swivel chair, a 32-inch touch screen and a desk equipped with an orchid. Each has 50 square feet, and two bathrooms for six passengers.

It’s a bet that travelers are willing to shell out for luxury cabins two years after the Covid epidemic lockdown that destroyed travel demand. Other airlines are taking similar steps with renovated cabins They were able to make some quick upgrades during the epidemic when they didn’t need many planes.

A roundtrip ticket on one of the Singapore Airlines suites from New York to Singapore, including stops in Frankfurt, Germany, was listed on the company’s website in early May for $ 17,143.37, including tax. The A380 is one of 78 new business-class seats converted to a 6½-foot bed on the same date for $ 6,362.87. Both cabins are at the top of the superjumbo plane.

Joey Cio, US regional vice president of Singapore Airlines, said passenger demand for upper-deck cabins was strong. Business-class seats on the plane are being sold before 343 economy seats, which is the opposite of a pre-epidemic trend, he said.

“Generally, people would prefer to go for economy class because it’s cheaper,” the CO told CNBC on the A380 before leaving for Frankfurt on Monday evening. “We see that more and more people are willing to pay for that place.”

Airlines around the world are hoping to benefit from this trend. This is important for airlines as they seek to return to profitability in the face of new challenges, such as labor shortages, the recent rise in fuel prices, the new Covid-19 variant and Russia’s invasion of Ukraine.

Premium Outperform

Over the past decade, airlines have been looking for new ways to accommodate passengers in more spacious seats, including the front suite of the plane and a new business class or premium economy, a Rumier seat with more seating in standard coaches. And in front of the plane.

While business travel demand is still about 40% below the 2019 level, so-called premium leisure travelers are again particularly important as a way to increase revenue.

Glenn Hawenstein, president of Delta Air Lines, told a JPMorgan industry conference earlier this month that “at first we thought people would only pay if their company paid for these products and services.” “What we’ve got in the epidemic is a massive hunger from consumers who want to sit on better products and services.”

He said Delta wants to expand these offers further in the future.

“Margins on premium products are significantly higher, and that’s exactly where we’re going as an airline,” said Hoenstein.

Rival JetBlue Airways has made its Mint Business Class a central part of its London service from New York, which it expects to expand with flights from Boston in the coming months.

Singapore Airlines A380 First Class Suite

Leslie Josephus | CNBC

Delta’s premium seat offer has grown exponentially compared to 2019, partly because the airline has restored some of its older planes with more spacious seats, spokesman Drake Castaneda said.

Carriers are banking on trans-Atlantic voyages especially this year, as several countries on both shores of the sea The Covid lockdown has eased in recent months after two years of weak demand.

Growing schedule

Now carriers are ramping up for a big summer, bringing with them some of the larger jetliners they used as epidemic salvage for domestic routes, with fares much higher on international routes.

According to flight data firm OAG, the airline’s trans-Atlantic capacity in July, measured by seats, is 10% lower than pre-epidemic July 2019 – but 170% higher than last year.

United say they expect its trans-Atlantic capacity to increase by 20% from 2019 in July. It is a Boeing 767-300ER flying with a high number of premium seats – 46 Polaris Business Class, 22 premium economy, 43 extra legrooms and 56 standard coaches – from Newark, New Jersey and Boston to London.

The rent has also gone up. Fare-tracking site Hopper says international flights are currently $ 810, up 25% from the beginning of the year when Omicron transmissions are typically a seasonal stagnation and 2% shy compared to the 2019 level, while domestic fares have risen 40% since the start of the year and 8% from three years ago. .

Singapore Airlines’ latest business class cabin debuts in New York

Leslie Josephus | CNBC

“At the moment it does not seem that high air fares are having a significant impact on premium demand,” said Henry Hartvelt, a former airline executive and founder of travel consulting firm Atmosphere Research Group. “Premium customers will end up feeling the most airfare impact because they can afford premium travel.”

Long-distance trans-Pacific demand has been slow to return, especially due to the severe coveted lockdown in China.

The CO of Singapore says relaxed travel restrictions in other parts of Asia are helping to encourage new bookings, but travelers are showing interest in its smaller legs, such as the A380 from JFK to Frankfurt.

“We hope that through a good product we can meet more customers who have not chosen us in the past,” he said.

Low margin for error

Carriers were able to test more freely during the epidemic. Historically low travel demand and one of the countries that have opened their borders to patchwork airlines are looking for opportunities to increase revenue wherever they can.

Now, with rising U.S. jet fuel prices and the uncertainty of Russia’s war in Ukraine and its impact on Eastern Europe, airlines have lower margins for error. The closure has forced some carriers to fly long distances to avoid Russia.

Although United is still planning a strong trans-Atlantic schedule, the airline said last week that it would not operate non-stop flights between Washington’s Dulles and Berlin, New York and Prague or Denver and Tokyo as planned.

“United regularly adjusts to our schedule in response to a number of factors, including demand, cost and resources,” the airline said in a statement. “We look forward to bringing these routes back into our network as soon as the market allows.”

Some airlines are also restricted by air. For example, American Airlines said last month that it would further cut some international routes, such as Seattle-London, due to delays in Boeing 787 Dreamliner deliveries.

Since the start of the war, some travelers have been choosing Western European destinations for better trafficking over Eastern Europe.

“We have certainly seen a decline in bookings for Eastern Europe and an increase in Western Europe,” said Kendra Guild, director of product and management at SmarTours, which offers packages around the world.

He said customers are not canceling but bookings in the Czech Republic, Poland and Croatia have declined while countries including Portugal, Spain and Ireland are relatively strong.

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