It is misleading to compare revenue per seat between classes as the space allocated to economy passengers is far smaller. On a “space” basis, the upper classes are more profitable, perhaps significantly because of the absence of competition from LCC in that class of service. The operating model that makes the success of LCC in economy class being hardly compatible with the service level required to compete in the upper class business, legacy carriers will probably remain unchallenged for many years to come.
The designer brand modelLet us consider a new business model for legacy carriers: the designer brand model. They already rely heavily on their prestige, and many of them on their national identity, to add superlative value to their product. They already have many of the characteristics of designer brands and if they eliminated the low-end product, the perceived value of the brand would rise thereby leading to higher pricing of their product. Without the mass product, the smaller volume of high value customers would make it possible to operate airport facilities entirely segregated from the economy class market. An example of that is the British Airways business class service from London City Airport to New York.
Eliminating the economy class would bring several financial benefits. The most obvious being the downsizing to smaller aircraft with about half the seating space and the short-haul routes, often run at a loss to feed the long-haul, which would only need commuter size planes.
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What about the Middle East carriers?On the upper class market, the Middle East carriers are not major competitors to the legacy carriers as they cannot offer non-stop point to point service on long-haul routes and they do not benefit from the historical prestige and origin of the legacy carriers. Compare the class configuration of their A380 with only about 15% of the seating allocated to upper classes with that of Lufthansa or Air France at 25% or more. They are not even trying!
Their strength has been in the economy market and their greatest threat will come from the long- haul LCC rising in Asia and Europe, at each end point of their largest markets. If the legacy carriers move further away from the economy market, it will be the long haul LCC who will benefit most, not the Middle East carriers.