Tim Clark, CEO of Emirates, is hinting that the airline might introduce a premium economy class. BTiQ doesn't know whether Clark is using the word 'consider' to prepare foundations for an imminent announcement or to test the reaction before proceeding with all the costly activity that introducing a new class entails.
If Emirates does introduce premium economy it's a significant move for what will be available — and at what price — for business travel buyers as well as be a big indicator of where the world's large network carriers see the market going.
Premium economy has been around for almost a quarter of a century. It was conceived in the heady days of the 1990s as a way of upselling leisure customers. In those days people didn't choose to pay for business class for their private travel and most business people automatically flew business class.
Cost consciousness not only caused procurement to join the ranks of travel management. It also introduced companies to the idea of using premium economy as an alternative to business class. You were likely initially to find more junior travellers in premium economy while their 'superiors' were firmly entrenched in business class. And then travel policy evolved into becoming more defined by sector. Manufacturers were more likely to have premium economy as their travel policy for long-haul journeys than banks.
But not all airlines offered the premium economy option. Although the concept was launched by Virgin Atlantic and adopted shortly afterwards by British Airways and Far Eastern carriers, US and Continental airlines were late to the party. Air France didn't launch premium economy until 2009 and Lufthansa only introduced the cabin in 2014.
Many carriers have resisted premium economy because it offers a viable alternative for business people but on a much lower average margin than business class. And there is inevitably 'leakage' of business class sales to premium economy.
But carriers are businesses that have to respond to market conditions and make decisions on the basis of what they think their market will want — and pay — in the future.
No Gulf carrier has a premium economy product. They maintain that their economy class is as good as other carriers' premium economy. But a slowing down of the oil industry has hit even their business class volumes and yields.
If Emirates introduce a fourth cabin it is hard to see Gulf Air and Qatar Airways not following.
But what will happen to product differentiation? Many believe premium economy to be no more than what economy class was before airlines slashed fares to lure large volumes of long-haul traffic.
Business class could be upgraded to create a differential but that would raise costs while also decreasing total revenue (unless perhaps the new configuration involves reducing the number of economy seats to make room for the new cabin?). The more likely scenario is that the economy product will have to be downgraded to emphasise the difference between products. That would save money and make premium economy look like a much more attractive option.
Tim Clark must think that the demand for premium class among business travel buyers is growing.