Two worlds — miles apart — exist on today’s airliners
Does the air world reflect the class gap in the rest of the world? As profit growth becomes elusive in a mature industry, ‘high-value customers’ get priority. Take a peek through the looking-glass at industry-leader Delta.
ATLANTA — If you’re looking for evidence of a widening class gap, take a look at the differences today between business class and coach on a flight.
For those whom Delta Air Lines considers its best customers, the experience may include expedited security screening where you can keep your shoes and belt on, followed by entry into an airport Sky Club with complimentary drinks and snacks.
That might seem far different if you’ve been munching on peanuts in your cramped seat in coach. Over the years, airlines have been squeezing more seats into the back of the plane and have removed some extras like free checked bags and meals. Now, much of their attention is on ever-more luxurious seats and amenities for those up front, where the profits are.
On long international flights, some well-heeled passengers are willing to pay upward of $8,000 for a ticket that includes the creature comforts in business class: Those heading overseas in Delta’s BusinessElite seats may dine on pan-fried halibut with spicy tartar sauce, smashed fingerling potatoes, asparagus and wine pairings. On board may be free movies and HBO, a seat that reclines into a flat bed with a comforter and pillow from Westin Hotels and a luxury amenity kit. Upon arrival back in Atlanta, there’s a chance of getting picked up at the gate in a Porsche.
“There’s no question that business class on long-haul flights has become much more comfortable, and if you’re in standard coach, it’s not always so pleasant,” said Hudson Crossing travel industry analyst Henry Harteveldt. “With airlines really focusing on premium customers, what we have to accept is that that’s who’s going to get the love.”
‘Like night and day’
A key reason is a mature airline industry. Particularly within the United States, there are few markets left for profitable airline expansion.
Airlines are searching for ways to squeeze more revenue from their customer base; thus, airlines are increasingly competing for the attention of those with the deepest pockets — corporate travelers.
“When we are talking about further development of the network, it’s really not putting more dots on the map, but making the dots we have produce a higher margin,” Delta’s executive vice president of revenue management, Glen Hauenstein, said during the company’s investor day in December.
All passengers experience the hassles of flight delays and other disruptions, but a sharpened focus on well-heeled customers is widening the gap between the haves and the have-nots on airlines.
It’s not just a bigger seat and better silverware up front. Today, the difference between business class and coach class “is like night and day, quite frankly,” said Ron Kurtz, an Alpharetta, Ga., resident who travels several times a year.
Most of the time, he’s in coach class, where “quite frankly, I find it miserable,” Kurtz said. “So many seats have been packed onto the planes now.”
But on international flights when he books business class, “it’s much more relaxing, it’s much easier to sleep. It’s much nicer,” said Kurtz.
The drastically different experiences are by design, said Harteveldt, the industry analyst.
“Airlines want this — there’s an element of psychology out there where airlines want people to realize that the more you pay, the better your experience will be,” he said.
Willing to pay for more
Premium passengers — whom Delta internally call HVCs, or high-value customers — represent a disproportionate share of Delta’s revenue and profits, with 5 percent of Delta’s customers accounting for 26 percent of the airline’s revenue. They “want and value more from Delta than the base offering,” said Delta’s senior vice president of marketing Tim Mapes.
In the past several months, Delta has announced a string of improvements targeted at passengers in BusinessElite, including more full-flat seats on a variety of routes — as competitors such as United Airlines have also done — along with new meals, wine, bedding and amenity kits. Also in the works are outdoor decks for Sky Clubs in Atlanta and New York.
Delta also recently announced plans to make elite status even more elite, by raising the bar to reach “Medallion” status in its SkyMiles frequent flier program to require a minimum level of spending in addition to miles flown.
During the company’s investor day in December, Delta President Ed Bastian said the airline wants to be the “airline of choice” for corporate customers.
It’s a far cry from Delta’s roots as a Southern airline that once specialized in taking vacationing families to Disney World.
“What we have now is something that’s very, very different,” said Hauenstein, Delta’s head of revenue.
The airline’s $3 billion investment into the customer experience is an evolution from where airlines were a few years ago, when Hauenstein said “it was really a race to the bottom” as airlines were focused on keeping costs down.
Now, some customers may want a stripped-down product, while others want much more — and are willing to pay more for it, according to Delta.
“There are people who want the lowest possible price from, say, Atlanta to Florida,” Mapes said. “There are equally people who want a great night’s sleep from Atlanta to Dubai.”
To be sure, some improvements Delta has invested in such as airport charging stations, Wi-Fi, seat-back entertainment, mobile apps and other technological tools make for a better experience for all travelers.
“All this investment starts with 100 percent of our customers,” Mapes said.
And some amenities like extra legroom are also available to those in economy class — for a fee.
Hauenstein said the way the airline sells travel has changed. “You’re not buying a seat from us. You’re buying a transportation experience, so you should be willing to pay different values for a different experience, even if it’s onboard the same airplane,” he said.
New level of competition
Part of the pressure to offer higher-end service is globalization of the airline industry.
With a route network that now stretches around the globe, Delta competes for customers with foreign carriers such as Singapore Airlines and Emirates that are known for especially high levels of service.
Strategic moves like Delta’s proposed joint venture with British carrier Virgin Atlantic are aimed squarely at corporate travelers who need to travel globally.
“Airlines know that if you’re flying business class across the Atlantic, then that’s where the big bucks are made,” said Atlanta-based customer experience expert Colin Shaw, who heads consulting firm Beyond Philosophy.
Delta is also expanding in New York in a move also aimed at that city’s lucrative business travel market — and as a result, the Atlanta-based airline’s focus has shifted slightly.
“In the past, everything Delta did began and ended with the thought of, ‘What are we going to do in Atlanta?’” Harteveldt said. Now, “New York really is the impetus for Delta investing so much to make itself a better airline.”
Delta is far from the only airline focusing more on high-paying customers.
Even Southwest, long known for its egalitarian flying experience, is offering better service to travelers who pay more. It sells BusinessSelect fares that include extras like priority boarding and a premium drink. Meanwhile, Southwest has long allowed customers to change flights without a fee, but it soon plans to add a penalty for no-shows who bought the cheapest fares.
But Harteveldt also cautioned that as fares rise, so will customer expectations.
“It’s one thing when you’re charging somebody $99 to go from Atlanta to Los Angeles,” he said. But when the lowest fare rises to $299 each way or more, “That’s a lot of money. ... I think some (airlines) are going to have to start re-examining — do they need to start giving things back to the customer as they raise airfares?”