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The end of First Class?

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Old 23rd May 2009, 08:57
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The end of First Class?

Just a BA problem, or the logical end of a long slide which will spread across the industry?

British Airways ditch first class in new planes as age of austerity bites

Fears that some wealthy customers may not return

Business class passengers famously draw envious glances from the herd in economy by turning left when they enter a plane, but it is the first class ticket holders who are the most pampered. On British Airways' 747s they ascend to their Kelly Hoppen-designed cabin and don their free pyjamas and slippers before supping on the likes of lobster thermidor, pan-seared wild Scottish salmon or roasted Cornish game hen, then slip between the sheets of their roomy – and extremely flat – bed.

Now, however, this most opulent form of travel is under threat.

The global downturn has devastated demand for expensive seats, and even Hollywood stars and bankers are shying away from BA's extravagant first class prices. The airline, stung by a slump in premium bookings that helped push the company into its worst-ever loss of £401m, has removed first class accommodation from four of its new long-haul planes, and is to review seating plans for other new aircraft.

"The long-haul aircraft that we take delivery of this year will not have any first class cabins in them," said Willie Walsh, BA's chief executive. He insisted there was no direct link to the recession, but he added: "Longer term we will review the configuration of [all] new aircraft." BA is also launching a service this year from Heathrow to Las Vegas, a prime destination for high-rollers, with no first class option.

First class is the last remnant of the more romantic days of air travel when BA's predecessor, British Overseas Airways Corporation, offered first class tickets alongside the more down-at-heel tourist or economy cabins. Its upmarket reputation has become even more rarefied over the years following the introduction of slightly less luxurious business class seats in the late 1970s, and cut-throat competition on the transatlantic market.

Walsh admitted that the cost of ripping out seats in the existing fleet is too great to get rid of first class in existing planes, leading industry watchers to speculate that upgrades for economy class travellers might become a more common occurrence. "In the short term we would have to spend money to do it and that's not necessary," said Walsh.

The review of seating layouts is taking place against the backdrop of a decline in business travel that poses a serious threat to long-haul airlines. BA relies on premium passengers for more than 50% of its revenues, more than any other major European airline. In an indication of the current mood of austerity, Walsh announced yesterday that he will work for no pay in July, and urged BA's 40,000 staff to take unpaid leave or work part-time. "This is no stunt. I do not easily give up anything I have earned," he said.

BA has seen premium bookings decline by 13% over the past six months with its north Atlantic routes, BA's main source of profits, badly hit by the crisis in the banking sector. Its rivals have fared just as badly, with premium travel since the start of the year slumping by nearly 20% across the industry. The International Air Transport Association expects business class bookings to recover once global trade picks up, but it is gloomier about the prospect of bankers flying again in the droves that have boosted BA's profits in recent years.

The recession has also reduced demand for corporate jets, emblems of excess whose use has caused serious embarrassment to companies bailed out by national governments, including some of the major American car manufacturers and RBS.

Business jet travel in the UK has fallen by 20% over the past six months, ending a boom that saw flight numbers grow by about 14% annually to 150,000 trips per year.

The cost of refitting an aircraft, at millions of pounds per plane, means that airlines will have to turn to riskier strategies such as overbooking flights until their new aircraft orders arrive. Airlines can guarantee strong revenues from economy class passengers if they overbook the back of the plane. Under that scenario, any passenger who is the victim of an overbooking could be upgraded to one of the many empty seats in business class, or bumped to another flight.
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Old 23rd May 2009, 09:04
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If BA improved their F product, there may not be such a problem.
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Old 23rd May 2009, 09:09
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Old news from the Gruadian.
The quality of the first class product has been dropping for years as business class has improved enormously.
The days of free Cuban cigars and a roast carved by your seat have gone to be replaced by much improved club sleeper seats, video on demand, laptop power supply et al.
I'm not surprised fewer people want first as the quality gap shrinks.
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Old 23rd May 2009, 09:12
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Actually, this is quite the wrong response from BA.

The very wealthy are immune from recessions as far as the comfort of their travel is concerned. It is the business travellers that are hit by recession.

First Class always pays its way. It's the size of the business cabin that needs to change - and that's neither difficult nor expensive.
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Old 23rd May 2009, 09:17
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Here in the Middle East, we are seeing a more mixed approach. Against the backdrop of the recent Arabian Travel Market in Dubai, the three big regional airlines (Emirates, Qatar, Etihad) all had differing views on the future of First Class.

Emirates Chairman, Sheikh Ahmed, remained bullish and vowed that Emirates would continue to offer First Class on all main routes and perceived that the currently drop in demand was only a short term event. They will continue to refit their standard First Class cabins with the new suites that appear on latest members of the Boeing and Airbus fleet. Emirates wishes to offer the best to those willing to pay and does not plan to abandon it's First Class Product.

Etihad's CEO, James Hogan, also announced the unveiling of Etihad's new style First Class suites. More luxury, comfort and privacy

Etihad clearly is going head-to-head with Emirates wherever it can, positioning itself at the high-end of the market by enticing the few remaining wealthy passengers in the current climate.

Qatar Airways CEO, Akbar al Baker, was entirely different in his approach. He claims to have forecast the end of the First Class market almost two years ago and notes that QR has embarked on a mission to remove First Class seating from the vast majority of it's Long Haul fleet. (The regional single-aisle fleet of A319 / 320 / 321 is sold as either F or J depending on the sector, although the product is quite identical). Qatar's view is that the future high-end will be focussed around Enhanced Business Class products, which he claims - in the case of QR - is anyway far superior to many other airline's First Class products. Qatar will retain First Class on only a small handful of long haul fleet. It's current fleet of 3-class A330-200's and -300's will be revamped with F class seating being removed. Today's premium travellers won't even visit the First Class fares section of websites any longer, as noone can afford it. So, enhanced J Class looks to be the way forward, in his opinion.

BA - along with many others - will obviously be flexible to suit market conditions, the removal of First Class will possibly be a temporary measure.
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Old 23rd May 2009, 09:46
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Actually, this is quite the wrong response from BA.
But its not a response from BA, as Basil said its old news. These aircarft were ordered a couple of years ago to start new routes and as such BA did not wish to have a first class cabin. End of story.

There have been 767s and 77s flying around for years with no F cabin.

BAs new F cabin will start flying in Sep, its hardly a retrenchment.
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Old 23rd May 2009, 10:17
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I've just had a play with BA's new F cabin and blow me is it nice! My only issue is that it's down from 14 to 10 seats in the B744 so potential yield is down but I think the punters will love it.
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Old 23rd May 2009, 10:54
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There will always be a demand for First Class on particular routes albeit less demand as even those Billionaires amongst us see a depletion in their total wealth due to the recession.
Perhaps BA (or any other First Class offering carrier) should take a middle ground approach and weighing up the cost of refitting against leaving as is maybe they should offer 'bargain upgrades' at check-in to anyone interested in moving up from coach or business for a 'once in a lifetime' experience. I used to do it on longhaul flights with carriers who offered it on certain sectors. $100 per head at check-in to upgraded to First Class, bargain I'll take two thank you!

That said isn't the First Class product on mainline carriers also suffering from competition from the growth in private jet ownership? How many of the super rich are just redirecting their wealth to other forms of even more exclusive travel? Jeeves fire up the Gulfstream would you old boy?
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Old 23rd May 2009, 10:59
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A 10-seater F cabin in the 744 will be very much more comfortable than NNCW and should tempt back the real money, including some of those who left BA for Private Jets over the recent years.
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Old 23rd May 2009, 12:04
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as my title suggests I have an interest

in pushing the private product.

BUT, for anything longer than 4-5 hours, and especially overnight, I would and do tell my punters that they should travel 1st Class, for the space, and comfort.

Our beds are not comfortable, well perhaps one is, the rest are worse than most business class.

Last edited by Gulfstreamaviator; 23rd May 2009 at 13:22.
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Old 23rd May 2009, 12:27
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Originally Posted by Albert Driver
First Class always pays its way.
So, then, why is the First cabin the least profitable cabin on BA aircraft?
Originally Posted by BladePilot
Perhaps BA (or any other First Class offering carrier) should take a middle ground approach and weighing up the cost of refitting against leaving as is maybe they should offer 'bargain upgrades' at check-in to anyone interested in moving up from coach or business for a 'once in a lifetime' experience. I used to do it on longhaul flights with carriers who offered it on certain sectors. $100 per head at check-in to upgraded to First Class, bargain I'll take two thank you!
That's really good for the punter who wants a freebie upgrade.

But beyond the left hand edge of the Atlantic, you can witness exactly what this approach does for the premium cabin. I'd rather First went altogether than have it fall prey to North American games.
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Old 23rd May 2009, 14:23
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So, then, why is the First cabin the least profitable cabin on BA aircraft?
There are lies, damned lies, statistics, and what the bean-counter wants you to believe.
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Old 23rd May 2009, 15:24
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Multi-class long haul aircraft have got to go

I've banged on about it many times before and I will continue to bang on about it because, little by little, it is getting closer.
There is already a chink showing through BA's insistance on multi-class aircraft with the introduction of the Biz Class A318 flights from New York to London.
Just as passenger ships had to give up the economic stupidity of multi-class travel all those years ago then the airlines have to do the same.
The bulk of people flying today want to be able to travel in the least expensive way but without being treated worse than cattle on the way to slaughter. That means current Premium Economy standards AS NORMAL throughout the WHOLE AIRCRAFT.
There will always be those who feel they deserve something better. Lottery winners and Arab Oil Sheiks are examples but in the main it is people whose employment packages include company paid travel who provide the customers for Business Class. BA's A318 program will probably do well. It never made sense to keep First Class once Business Class standards began improving. But it is still a limited market and likely to become more limited as the financial crisis continues.
A one class - Premium Class A330/340 or a B777 will create more real revenue than a 3 class aircraft once the cost of separate cabins, incredibly complex seating, special airport lounges, facilities, check-ins, extra staff both in the air and on the ground, special menus etc etc are removed.
The one exception might be the B744 where the upper deck can be reserved exclusively for Business passengers whilst the whole of the lower deck becomes Standard Class with current Premium Economy Class seat pitch and facilities.

Last edited by Xeque; 23rd May 2009 at 15:49.
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Old 23rd May 2009, 16:19
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Xeque

"The bulk of people flying today want to be able to travel in the least expensive way" - CORRECT

"That means current Premium Economy standards AS NORMAL throughout the WHOLE AIRCRAFT" - RUBBISH

Long haul leisure travelers are exceptionally price sensitive, especially if they're buying tickets for a whole family. Your configuration will never deliver the cost per seat consistent with the lowest fares.

And you speak like someone who's never flown as a pax on company business. Companies that use business class for their staff do it not to throw away money, but for efficiency. The person who is going to get off a long overnight flight and go negotiate a multi-million dollar contract needs some rest. Apart from the physical comfort aspect, how does your single class cabin separate the business traveler from crying babies and screaming kids?

Sorry, it's flawed.
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Old 23rd May 2009, 17:03
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Multi-Class will remain - it's just that the classes are changing, from:
  1. First + Econ
  2. First + Club + Econ
  3. First + Club + Prem Econ + Econ
to some other new combination that the market place has not yet finally decided upon. The first think (Ha-Ha) is that Biz is good enough for most people and the demand for pure First is smaller, for now.

As to the problem of companies saving money on not paying biz fares, I well recall arriving in HKG completely zonked having had to do 14 hours in Y, because the client would not pay for C. The next day were some very important presentations on a highly technical and complex project, upon which I had to adjudicate which was the best solution for the client. I fell asleep in the presentations.
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Old 24th May 2009, 03:47
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And you speak like someone who's never flown as a pax on company business.
Actually I did, once travel Biz Class on company business. Bahrain to Windhoek (Namibia) via Dubai and Jo'burg with a stop at Mauritius on the way back. But only once. In all of 20+ years working in the Gulf all other company travel whether on business or going on leave of absence was in Economy. That included a proposed trip Dhahran to NewYork using the (then) PanAm/Saudia direct flight. The trip was, thank God, cancelled.
I used to travel a lot but, as I get older, I've had to curtail it. I now find that I get severe and lasting pain in my knees and lower back after (say) a direct flight from BKK to LHR (11 hours). I have to travel Economy because I simply cannot afford the fares in Business and First even when on business (it is seldom that a client will pick up the tab for you these days). The one ray of light on the horizon is that EVA Air whom I have used a lot in the past, are now offering some very competative fares in their Premium Economy and that is what I shall use for my next trip to the UK whenever that may be - but into Amsterdam then the train to London avoiding Heathrow like the plague - but thats another story.
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Old 24th May 2009, 05:17
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I used to do it on longhaul flights with carriers who offered it on certain sectors. $100 per head at check-in to upgraded to First Class, bargain I'll take two thank you!
Those days are looooong gone.

Out of curiosity, just did a Yahoo Travel search LAX-LHR R/T

The average prices were:

Y $900
C $3,000
F $15,000

Guess which ones are profitable.
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Old 24th May 2009, 07:28
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Desert Diner

C and F are only profitable so long as there are bums on seats.
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Old 24th May 2009, 09:06
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C is approx $0.27/mi and F is $1.37/mi so each bum is very profitable.

The empty seats also soak up alot of air miles.

Besides most airlines will only op-up only their gold platinum customers, so they never give them away.
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Old 24th May 2009, 12:24
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Setting out to prove my point

Consider this and then argue that I'm not right in my thinking.

Seating.

I have used a Singapore Airlines B773ER in three class configuration (F, B and Y) as an example

First Class

8 seats in 2 rows of 4 at 71" pitch

Business Class

42 seats in 10½ rows of 4 at 51" pitch

Economy Class

228 seats in 26 rows of 9 at 32" pitch (rows at the back are 8 across)

Total cabin length occupied by seats (excluding toilets, galleys and entrances) is around 1500 inches or 125 feet.

Fares

The example flight is Singapore to London and return departing May 30, 2009 and returning June 30, 2009. Fares quoted are from Yahoo Travel on the Internet

First Class

From $6358 (Jet Airways) to $12,164 (Singapore Air) seats available

Business Class

From $2,700 (Qatar Airways) to $7748 (British Airways) nearly all seats booked

Economy Class

From $1077 (Etihad) to $3213 (Singapore Air) no seats left

Probable Round Trip Revenue

Assuming First Class stays half empty then the minimum revenue is around $400,000 whilst the maximum could be $1,100,000. The reality is probably around $600,000 once agency fees have been deducted. I should also add freight revenues but I have left these out of the argument because I have no way of calculating them.

Then there are aircraft depreciation/leasing fees, fuel charges, crew wages, crew accommodation, catering, landing fees, airport charges (check-in, hospitality suites, transport), company overhead etc etc to come out of that before you arrive at a flight profit figure.

The One Class Option

The same aircraft making the same flight in One Class, Premium Economy configuration - 312 seats in 39 rows at 38" pitch - will recover $600,000 with a round trip fare of $1,925 per passenger which is, coincidentally, the mid range of the fares quoted on Yahoo Travel for basic economy.

The round trip SIN/LHR/SIN is 11,800 nautical miles. That works out at 16.3 cents per passenger mile.

And the 40 displaced Business Class passengers - put them on a special aircraft for Business Class only, just like BA are proposing for their JFK to LCY route. Alternatively, if you are using B747's, put 'em upstairs. The new 748 should be able to handle that.

Last edited by Xeque; 24th May 2009 at 13:14.
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