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BBT July/August 2018
July/August 2018
For Business, Corporate Travel & Meeting Buyers & Arrangers

Special report: Premium air travel

Premium cabins are undergoing a transformation as new types of long-haul aircraft enter service

The early weeks of 2018 were dominated (at least in aviation circles) by talk about the questionable future of one of the industry’s most heralded – and still relatively young – aircraft, the Airbus A380, colloquially known as the superjumbo.

After several years of dwindling orders for the behemoth of the skies and plenty of speculation about its future, Airbus finally admitted that it may have to shut down production unless it received a major new order for the superjumbos. Lo and behold, a few days later, Emirates ordered 36 new A380s and the production line’s future has been secured.

The A380, which was first launched as a commercial passenger jet by Singapore Airlines in 2007, has long been leading the way for innovation within the premium cabins, with all that extra room allowing airlines to get creative. Back in 2014, Etihad Airways garnered a lot of publicity when it launched The Residence – the first multi-room suite on a commercial passenger aircraft – featuring a separate lounge, bedroom and shower room.

Other airlines have been slowly trying to catch up with such developments – Singapore Airlines launched new first class suites with fully-flat double beds towards the end of 2017 on its A380s. UK passengers now have a chance to try out these upgraded cabins as the service was launched on Singapore’s Heathrow route in February.

While the superjumbo has always been a headline grabber, it’s the emergence of two smaller long-haul aircraft – the A350 and Boeing’s Dreamliner – that will have more significance over the next few years as airlines put more of them into service. Both aircraft offer compelling economic benefits to airlines.

The first A350 services were launched by Qatar Airways in early 2015 but production is really starting to gain critical mass now with 78 deliveries to airlines last year – compared with just 15 superjumbo deliveries. Airbus has so far received orders for more than 850 A350s from airlines, with fewer than 150 of them being delivered so far. The latest version of the aircraft, the A350-1000, was due to be handed over to its launch customer – which is again Qatar Airways – in February.

Boeing’s latest version of the Dreamliner – the B787-10, which is 5.5 metres longer than the B787-9 and will carry around 330 passengers – is scheduled to enter service with launch customer Singapore Airlines during the second quarter of 2018. The carrier said it would receive the first of its 49 B787-10s in March. So far, Boeing has  reported that it has 171 firm orders for this version of the aircraft.

The two aircraft types are seen as being direct competitors in the long-haul market with similar passenger capacities and flying ranges. These aircraft will be of particular interest to UK business travellers with British Airways and Virgin Atlantic due to start flying them from 2019 onwards.

UK airlines
BA currently has 18 Airbus A350-1000s on order as well as 12 Boeing 787-10s, while Virgin Atlantic has ordered 12 A350-1000s, which will have three cabins: economy, premium economy and Upper Class.

Receiving these new aircraft in 2019 will coincide with the launch of BA’s long-awaited new Club World business class seat, which is currently “in development” and will be rolled out from next year. BA is investing £600 million in Club World “with an emphasis on improved catering and sleep” over the next few years, including the new seat.

BA’s chief executive officer Alex Cruz has already confirmed that the new Club World seat will be installed on both the A350s and B787-10s. He has also said that all seats in the cabin will offer “direct aisle access” – BA’s current Club World configuration has long been criticised for failing to offer this facility from many seats in the cabin.

Cruz has insisted that BA is still a “premium airline” and that the “glory days” are coming back as the airline prepares to celebrate its 100th anniversary in 2019.

“We are always going to be a premium airline and we must live up to that promise,” he says. “We will have the new Club World seat from 2019 but we want to provide a quality experience whether you are travelling first class to New York or economy to Barcelona.

“Beyond the new Club World seat, we are determined to continue investing in the rest of the classes. First class is here to stay but we have to right-size it. There are a lot of markets that don’t need 14 seats in first class. We have to make first class very special – it will come a bit later, after Club World. The demand is there and we’re committed to it.”

Cruz has also promised to improve the Club Europe business class service on short-haul routes with BA set to enhance the catering offered in this cabin this year, following on from last year’s upgrade to Club World’s catering on long-haul flights.

Virgin, meanwhile, has yet to reveal its plans for the premium cabins to be fitted on its A350s from next year.

Product enhancements
So while we wait to see exactly what BA and Virgin will do with their premium cabins on these new aircraft, what about carriers that are already operating A350s?

Cathay Pacific has had A350-900s in service for almost two years and the Hong Kong-based airline has used their introduction to launch a new business class seat.

“The new seat builds on its predecessor with numerous enhancements, including a larger flat bed, a superior in-flight entertainment system with high-definition personal TVs and a touchscreen video remote control,” says James Ginns, Cathay Pacific’s general manager Europe. “The launch of the A350 also sees the introduction of Cathay Pacific’s second generation premium economy class seat.”

Meanwhile, Delta has become the first US carrier to start operating the A350, with flights to Tokyo, and is due to launch the aircraft’s first transatlantic route between Detroit and Amsterdam from 31 March. Delta’s A350 sees the long-awaited introduction of the Delta One business class suite, complete with its own sliding door. The airline also plans to retrofit the Delta One suite on to its entire fleet of Boeing 777s.

Looking more widely, new enhanced premium cabins are already catching the eye of those in the corporate travel industry, with several name-checking Qatar Airways’ new Q Suite, initially launched last year on its Boeing 777s, as raising the benchmark for business travellers. Q Suite has also been installed on Qatar’s new fleet of A350-1000s.

Jo Savory, head of account management at travel management company Clarity, says: “Qatar Airways’ Q Suite has introduced tables of four, making it easy for groups of colleagues to convene and hold meetings when travelling. This is going to be a big change in terms of increasing productivity during travel.

“The Etihad Residence has been an industry game-changer. It’s currently the only airline accommodation of its kind, but I wouldn’t be surprised to see other airlines compete to launch similar luxury cabins in 2018.”

In terms of any new revolutionary types of service or onboard product, most eyes have turned to the new “ultra-long-haul” flights, such as Qantas’ imminent new Heathrow to Perth, which is due to launch this Sunday (25 March) using a Dreamliner 787-9. The flight will travel 14,498 kilometres in a whopping 17 hours – this is only slightly shorter than the 14,535 kilometres covered by Qatar Airways’ Doha to Auckland service that launched a year ago.

This could be just the start for these ultra-long-haul flights, thinks Kavon Bagheri, air product manager for FCM Travel Solutions.

“We are likely to see Qantas challenge Airbus to match its current Boeing 787-9 direct service from London to Perth and introduce a direct A380 flight from London to Sydney,” he predicts.

“This gives Qantas the ability to tout themselves as the first and only ultra-long-haul airline, and aims to offer a better customer experience on the 20-hour+ direct flight by reducing seat numbers and offering walk-up lounges and bars.”

Premium trends
While there is going to be an understandable focus over the next couple of years on new aircraft and the premium cabins being installed on them, a more immediate concern to travel buyers is how much it is going to cost to travel at the front of aircraft this year.

Several TMCs have produced forecasts on the likely direction of premium airfares during 2018. The latest of which, from American Express Global Business Travel, suggests that there will only be “marginal gains” in ticket prices, with the growing strength of the global economy being mostly offset by an increase in capacity to meet this higher demand.

American Express GBT forecasts that UK carriers’ fares will “remain flat” in 2018 with only a marginal increase of 0.25 per cent expected on long-haul business class prices. However, long-haul business fares are expected to rise more strongly in other key markets such as France (+2 per cent), Germany (+2.75 per cent) and the US (+4.9 per cent) as their economies are set for faster GDP (gross domestic product) growth than the UK.

BCD Travel’s research arm Advito is forecasting an overall rise in global long-haul business class airfares of 1 per cent this year with the highest rises on intercontinental prices in Europe, set to rise 2 per cent, and by 1 per cent in North America. Carlson Wagonlit and GBTA (Global Business Travel Association) also expect overall airfares to rise in Europe this year – by 5.5 per cent in western Europe and 7.1 per cent in eastern Europe.

The trends in premium air travel varied greatly by region during 2017, according to IATA, with higher growth in Europe “driven by the region’s stronger economic backdrop”. But premium demand has “lagged behind” on routes between Europe and the Middle East, and between North and South America.

While premium air travel demand is closely correlated to the economic performance of regions and individual countries, this can also be seen across different sectors and industries.

Who’s travelling?
TMCs identify industries such as banking, financial services, consulting and IT as those sectors where business class air travel has been increasing year-on-year, while the energy sector is “starting to rebound” as the price of oil has slowly crept up over the last 12 months. Other industries that remain “cautious” about booking business class travel include retail, engineering and consumer products.

According to CWT, employees from the energy sector still account for 23 per cent of international business class travellers, despite the industry’s struggles since 2014, followed by the financial sector with a 19 per cent share of the market.

The energy sector could bounce back further in 2019 thanks to the policies of US President Donald Trump, according to Paul East, chief operating officer, UK, Europe & Americas, at Wings Travel Management.

“Trump has controversially signed executive orders to allow the construction of new pipelines, creating more jobs in the oil sector,” explains East. “While these are unpopular in terms of their impact on the environment and climate change, ultimately they could create more jobs in the oil sector, and generate more business travel.”

With the global economy seemingly on the up – even if the picture is more gloomy in the Brexit-obsessed UK – are organisations starting to loosen up on the policy restrictions put in place since the financial crisis and recession of 2008-09?

Talk to TMCs and travel buyers, and you will find that there is no rush to return to the pre-crisis days when it comes to relaxing the travel policy that determines whether a traveller can fly in a premium cabin or not. Indeed, some organisations are even pushing out flight time thresholds for business class travel from four to six hours to six to eight hours.

“There has been little or no change on average to company policies regarding the number of hours a traveller must fly before being able to book business class,” says Jennifer Charlton, vice-president of global supplier relations for American Express Global Business Travel. “However, policy does vary per industry and some are becoming less strict about allowing travellers to book business class.”

An organisation’s willingness to allow travellers to fly in premium cabins can also come down to where the client is based, says Paul Dear, global director of supplier and industry affairs at HRG.

“It can depend on where the head office is – if it’s a company with a US head office then the threshold can be six hours and above, which is basically the flying time to go outside the US,” adds Dear.

“But if it’s a European-headquartered company then it’s often four hours and above when they can fly business class because that’s the time it takes to fly outside Europe – there’s a different perspective. Generally I would say that 90 per cent of clients would have either a four- or six-hour policy, although a few have 10-11 hour policies.”

Airlines may be making headline news with their latest aircraft and more technologically advanced seats. But for the majority of buyers the same priorities remain: getting the best seats on the right routes at the lowest price. A more comfortable seat and a few new gizmos are unlikely to change that dynamic.

This point was reinforced in a survey carried out at the recent Business Travel Show. It revealed that in 2018 “cutting costs while maintaining quality” was the top priority for buyers. This was buyers’ chief concern for the third consecutive year.

As one buyer put it: “Having a new seat is great for our business travellers, but ultimately we have to get a business class seat for the right price. That pressure on costs is never going to go away.”

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