U.S. airlines are all adding more comfortable and larger seats on their planes to meet the increasing demand from consumers for high-end travel experiences. They are seizing the opportunity to capture market share and boost profits.
According to a report by Reuters, American airlines are rushing to increase the number of premium seats on their flights to attract passengers willing to pay extra for a more comfortable journey. Even low-cost carriers such as Southwest, Spirit, and Frontier Airlines are departing from their traditional business models to attract customers.
With the travel boom that has emerged after the pandemic expected to last for years, U.S. airlines are competing to gain a foothold in the high-end market segment in order to seek higher profits and offset rising labor and operational costs.
Due to the strong demand for premium cabins, Alaska Airlines reported a significant adjusted pre-tax profit margin in the second quarter, the highest among major airlines nationwide. This robust demand has also boosted the earnings of Delta Air Lines and United Airlines.
Alaska Airlines has revamped its entire regional fleet this year, adding 400,000 premium seats. The company’s current plan is to add 1.3 million premium seats annually to its mainline fleet.
Delta Air Lines announced last year that all its aircraft will be equipped with premium seats. At United Airlines, it is projected that by 2026, the number of premium seats on each flight in North America will increase by 75% compared to 2019.
Xavier Smith, research director at market research startup AlphaSense, stated that overall, it is expected that by 2026, the number of premium seats on U.S. airlines will increase by 50% compared to before the pandemic.
However, airlines may become too aggressive, leading to oversupply and damaging their pricing power. The revenue of airlines has already been affected due to an oversupply of premium seats in the domestic market.
Smith emphasized that airlines must gradually introduce capacity to protect their pricing power.