By Aviation Business Staff Writer
Amid a global downturn, airlines are opting to cut first class from planes but could they be turning passengers away for good?
With the recession causing a dent in premium travel, airlines are opting to cut first class from planes altogether, but they could be turning passengers away for good.
The days of ultimate luxury on flights could be fading for high-end spenders in the Middle East, as a severe drop in demand for first class travel has prompted airlines to actually remove the cabin from their aircraft. The trend was started last year, after a knock to the luxury travel market from the global recession.
Data from IATA's Premium Traffic Monitor in December 2009 showed that demand for premium travel was down a staggering 17% below 2008 levels, which implied the aviation industry had "effectively lost around six years of premium travel growth". A similar report by Euromonitor International - entitled ‘Luxury Travel: Changing Travel Habits of the Elite' - further highlighted the unprecedented drop in premium travel services since the global financial crisis, forcing airlines to slash their prices for first and business class tickets and create promotions to encourage top-end flight purchases.
"The global economic downturn has shrunk demand for premium travel, and it is difficult to determine whether it will ever recover to the peaks seen in 2007," the Euromonitor report explains. "Many airlines have changed the configuration of their planes to reduce the number of premium seats, and it is likely that a percentage of business travellers have permanently defected to the cheap seats."
Cutting out first class
In March, Singapore Airlines unveiled its brand new A330-300 in Abu Dhabi. The new planes replaced the older Boeing 777 for flights from the UAE's capital to Singapore, as well as Singapore to Kuwait and Jeddah. Despite being a premium carrier, which has built up a favourable brand image for providing clients with luxury service (the airline was one of the first to introduce hot meals, free drinks, hot towels and personal entertainment systems for all classes), Singapore Airlines has chosen to ditch the first-class cabin on new planes altogether, designing them in a two-class, economy and business configuration.
"The demand for first class has dropped in certain sectors, especially the medium haul sector. Last year, because of the economic downturn, there were a lot of changes in the travel policies of multi-national companies, which would choose premium travel," comments Desmond Lim, Abu Dhabi manager of Singapore Airlines. "We have always modelled our cabin according to market requirements and we see that demand for first class is more on very long haul sectors, rather than medium and short haul routes, so we tailor our product accordingly."
The airline insists that the enhanced comfort of the business class section, with its lie-flat beds and iPod ports, will more than make up for a lack of first class. "Although there is no first class, the business class cabin offers a lot more comfort and luxury for our customers," adds Jose Thachil, marketing manager of Singapore Airlines in the Gulf.
Other carriers are taking similar steps to reduce a reliance on first class. Earlier this year, Qantas announced plans to scrap two-thirds of its first class seating to make room for more economy seats on long haul flights, as part of a US$350 million overhaul. The carrier will reconfigure 29 aircraft, leaving first class on just 12 Airbus A380s. "Our assessment of longer-term travel trends, which pre-dates the economic crisis, shows that international premium travel demand is changing," states Alan Joyce, chief executive at Qantas. "It is vital that we align this offering with forecast demand, which is expected to be relatively slow compared to business, premium economy and economy."
Doha-based Qatar Airways, known for the high standards of its premium cabins, which feature a stand-up bar, cream leather sofas and teak tables with lampshades, also announced plans to eliminate such luxuries from planes scheduled for delivery. Chief executive officer Akbar Al-Baker told delegates at the recent ITB conference about plans to gradually replace its first-class cabins with business-class seats on a number of future aircraft, including 18 Boeing 777s. "We have made this decision as we will introduce an outstanding new business class in 2011," says Al-Baker.
Loss of long term business?
While the recession has made a serious dent in the demand for premium air travel, not everyone believes that scrapping first class is the way forward. Natalie Matteus from luxury travel company Odysseus Deluxe Travel Collection says the move could be detrimental to long-term business for airlines.
Odysseus, which caters to high net worth travellers, has reported that its own data reveals a slight fall in the use of business class, but not in first class. "People who can afford to travel first class will end up changing to other airlines that offer this service. There are only a handful of airlines that offer a first-class service and these are seen as the very best airlines. First class should always be on offer for long haul travel and for Middle East and Far East markets," explains Matteus.
"It's a matter of vision and reputation. Skipping your best service might offer some short-term profits, but in the long run those who invest in first-class will benefit more," she adds. "It's really a pity that Singapore Airlines has taken this step, especially as people from this region really value these services. Maybe they are doing the right thing in the short-term, but I would say for this market, they are losing out on a lot of long-term clients."
There are still some carriers that agree with this sentiment. Gulf airlines Emirates and Etihad have bucked the budget trend altogether to launch lavish new premium cabins (Etihad was recently awarded ‘Best First Class' at the World Airline Awards) and neither airline has reported plans to cut back on its first class offering.
"We have an excellent and very competitive premium class offering, and our first and business cabins continue to be an important part of our product mix," says Ahmed Khoory, Emirates' senior vice president of commercial operations in the Gulf region. "We have no plans to reduce the number of first and business class seats offered in our existing cabins."
Peter Baumgartner, chief commercial officer at Etihad, confirms the airline has a similar approach. "We take a longer, more strategic approach to the cyclical aviation industry and are confident that premium travellers will return as global markets return to stronger trading conditions," he states.