First-class shake-up in the skies: the leisure takeover of premium cabins

As the coronavirus pandemic receded, holidaymakers surged back into the skies last year. And it was then that Lufthansa’s boss Carsten Spohr realised he had a problem, albeit a welcome one: the airline did not have enough first class seats to meet the boom in demand from leisure travellers.

“This year is the first [in which] all my team tells me we need to grow first class . . . I never thought I would ever hear that,” Spohr recently told industry analysts.

This spring, Lufthansa finally debuted a range of new long-haul cabins that included fully enclosed first class private suites with double beds, part of a €2.5bn investment.

And these long-awaited cabins illustrate how airlines are racing to set new standards in luxury flying as the industry continues to recover from the worst of the pandemic.

After spending decades tailoring premium cabins to corporate travellers, who reliably filled them, airlines now face a challenge to adapt their products to a new kind of high-end passenger — the holiday-maker.

That’s because, these days, the customers filling the highest priced seats are more often than not leisure travellers, who have spearheaded a boom in business class and first class travel over the past two years, in a significant shift for the world’s airlines.

“In recent years, we’ve noticed a growth in the number of people in our premium cabins for personal leisure travel reasons, which is a shift from the traditional corporate travellers dominating the business and first-class cabins,” says Eduardo Correia de Matos, director of customer care at Middle Eastern airline Etihad.

Airlines say they had started to see a rise in premium leisure travellers before 2020, but the pandemic has supercharged the phenomenon.

Airline bosses put this down to two factors. First, during the darkest days of the pandemic, many people hoarded extra cash as they had little to spend it on during lockdowns. Households in Europe and the UK were saving a quarter of their disposable income in the first quarter of 2020, according to London Stock Exchange data.

Second, when they did travel, people were willing to pay for a little extra personal space, as they compensated for the possible airborne spread of a virus in crowded cabins.

However, even with the pandemic now a fading memory, the trend has continued, leaving airline bosses increasingly confident a structural shift has taken place in the industry as leisure travellers compensate for any long-term decline in corporate passengers.

“People are willing to spend more on experiences because that is a lasting memory,” says Virgin Atlantic’s chief commercial officer Juha Järvinen. “People do want to invest in their annual or twice a year holiday, they want to trade up.”

Trading up is expensive, though. The average price for a first-class flight between London and Sydney for a two-week trip over Christmas is between £7,100 and £10,500, according to Google data. Flights to New York from London over the same peak period are between £4,050 and £7,600, while Paris to Dubai averages at about £6,000. The cost of economy is a fraction of these prices.

British Airways — at the time, calling itself “the world’s favourite airline” — fired the starting gun on a race to improve the in-flight experience when it unveiled the world’s first lie-flat bed in first class, in 1995, extending it to business class in 2000.

But then came deep-pocketed rivals based in the Gulf that took luxury in the skies to new levels over the following two decades. Eclipsing the European and American carriers, Middle Eastern airlines introduced enclosed seats to maximise privacy. They also served luxury food such as caviar and fine wines, and introduced opulent spas in their airport lounges.

This culminated in Etihad’s “The Residence”, launched a decade ago on its superjumbo Airbus A380s. It offered luxury travellers willing to pay the often five-figure price tag a suite that included a bedroom, living room and toilet.

Etihad had expected to retire its A380s following the collapse in air travel at the height of the pandemic, but it has brought the sky’s largest passenger planes back into service to meet booming demand for travel.

Emirates has embarked on a $2bn programme to retrofit its older aircraft with new cabins

And, as the industry recovers from the effects of the pandemic, many airlines are now looking to refresh their aircraft cabins. As well as Lufthansa’s initiative, Emirates has embarked on a $2bn programme to retrofit its older aircraft with new cabins, while American Airlines has fully enclosed its business class seats to add privacy. Elsewhere, Finnair has introduced a new design of seat that challenges conventional wisdom by not reclining at all, instead resembling a daybed.

“Our premium cabin footprint will continue to increase over the next few years as we expand our fleet,” says Nabil Sultan, executive vice-president for passenger sales and country management at Emirates.

The airline industry had been used to dealing with the classic corporate traveller, numbed by dozens of work trips a year, who values speed and convenience over luxury and experience. “If you are an airline, these people are your dream customers: their employer pays stupid money for flexible tickets and, in general, they are pretty jaded travellers,” says Rob Burgess, the editor of frequent flyer website Head for Points. “They get straight into their seat, put the seatbelt on, a duvet over their head, refuse all food and drink and sleep,” he explains.

But now, airlines must cater to customers who want to make the most of their experience after parting with several thousands of dollars of their own money. Eerika Enne, head of in-flight customer experience at Finnair, says that there are some “base needs” that corporate and leisure travellers have in common, notably “a hassle-free journey and high quality experience”.

However, she adds that leisure travellers are not as time sensitive and want a fuller experience on a flight.

“They want to spend a bit more time in the lounge . . . also on board they want to enjoy the full dining experience, watch a movie and really take it in,” she says.

Daniel MacInnes, an executive at aircraft design company PriestmannGoode, says clients are demanding “unique” products when they sit down to design a new cabin.

“Everybody has moved the goalposts and gone ‘well, actually, our traveller is wanting more’,” he explains.

“A passenger sitting in first class wants that seat to be the comfiest they have ever sat in and it needs to be the best aircraft cabin they have ever been in . . . There is an understanding now that it needs to be akin to buying a private jet, and the level of detail is really amazing. When we are trying to look at new materials and details, it is Rolls-Royce or the Four Seasons Hotels [that are the models].”

Etihad’s Matos agrees that passenger demands are changing, as they want the flight to become part of their holiday experience, rather than just the journey.

“Travellers have become even more discerning, and we believe they are seeking travel experiences that offer exclusivity and indulgence, beyond just the extra comfort that a premium cabin provides,” he says.

BA finds passengers are spending longer in the lounges since the boom in premium leisure travel began. As a consequence, it has responded by remodelling some of its lounges including a reduction in the size of business working areas, which are being replaced with more comfortable seating for its leisure travellers.

Passengers want the flight to become part of their holiday experience, not just the journey

Some observers believe that airlines need to work harder to change their products to reflect the changing nature of their customer base. Burgess says that, regardless of the new cabins, many airlines “are not geared up” for the sort of service demanded from a new breed of passenger who prioritises luxury and compares airlines with the five star hotels where they stay.

“The problem is, these people want value and to feel they are getting something for their money,” he highlights. “So, if you are spending £1,750 to fly from London to New York in business class, then you do actually want a half-decent meal served on a proper piece of china, not in a metal tub. You would like a decent brand name champagne pulled out,”

Gerard Aquilina, an adviser to family offices, says travel has become an increasingly large part of rich individuals’ spending since the pandemic ended.

But, as Lufthansa found, one of the biggest problems has been the lack of first class seats being offered after many airlines replaced their most expensive cabins with more business class seats, or used the space to bring in premium economy cabins — a middle ground between business and economy.

“You do have Emirates or Qatar and still some first class on BA, but many airlines don’t have first class any more and that is an irritant to the super-rich,” Aquilina observes. “Many people yearn for the days when it would take three hours to get to New York [from London] on Concorde. I dare say in today’s world, with the wealth that exists, it is a bit surprising that supersonic airlines aren’t around anymore,” he adds.

Regardless, the holidaymakers have kept coming, and many airline bosses believe the shift from corporate to leisure is permanent. “Looking at all the indicators we follow, we haven’t seen any trends of reducing [demand for] premium leisure travel,” says Virgin’s Järvinen. Finnair’s Enne agrees: “We definitely see it as a trend here to stay.”

Indeed, nearly every airline across the world has reported continued high demand for premium leisure travel, including during the typically quieter northern hemisphere winter, when many European travellers head for the Caribbean or the Maldives.

And this increased spending by leisure travellers comes despite a slowdown in other parts of the luxury sector, particularly designer clothing, as the post-pandemic boom in retail fades.

Gucci owner Kering issued a rare profit warning this spring, and analysts say shoppers around the world have reined in luxury spending habits, at least to a degree, in a tougher economic environment.

The difference, many in the airline industry say, is that consumers have begun prioritising experiences after being locked up during the pandemic — and that extends to their means of travel.

As Delta Air Lines president Glen Hauenstein put it last year: “Once you start flying in those [luxury] cabins, you tend not to go back.” 

This article is part of FT Wealth, a section providing in-depth coverage of philanthropy, entrepreneurs, family offices, as well as alternative and impact investment