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Demand for airlines' premium products soars as leisure flyers continue to trade up

Leisure flyers have increasingly purchased premium-seat products during the pandemic, a trend some airlines are betting will buoy the industry even if unpredictable developments, like the omicron variant of Covid-19, extend the timeline for business-travel recovery.

"We believe that through the pandemic we've created kind of a new class of customer, which is the high-end consumer that wants these products that maybe didn't have as much access to them because they were given to the business customer earlier in the booking process," said Delta president Glen Hauenstein during the company's October earnings call.

Hauenstein said that for July through September of this year, premium revenue for Delta's domestic and short-haul Latin market flights outperformed main cabin revenue, with the percentage of seats that were sold in first-class cabins and for Delta's coach cabin extra legroom offering, called Comfort+, exceeding even 2019 levels.

Those encouraging numbers came as business traffic at the airline remained down 60% from 2019.

"So I think the big epiphany for us was there's a much broader demand for this than just business travelers," Hauenstein said. He hinted that Delta could announce an expansion of its premium offerings during its Investor Day event on Dec. 16.

If the carrier makes such a move, it won't be alone. Emirates last month announced that it will retrofit 52 of its existing Airbus A380s and 53 of its existing Boeing 777s with premium economy cabins by the end of 2022. The move marks a big shift, as Emirates will have only six planes featuring the premium economy cabin class by the end of this year.

"Emirates is investing in this retrofit program to ensure that we continue to serve our customers' needs and provide the best experiences in the sky," Emirates CEO Tim Clark said at the time of the announcement.

Meanwhile, United and American have also benefitted from the growing popularity of premium products among leisure travelers.

In October, United chief commercial officer Andrew Nocella said the carrier has been selling first-class and Economy Plus extra legroom seats with higher load factors than in the past, adding that domestic first-class revenues over the summer reached the 2019 level. Nocella said he is bullish that the premium leisure demand surge is permanent, though that must still be proven.

"In the unlikely event corporate demand is not 100%, we do have other levers to push, and this one has become increasingly obvious over the last three months as an opportunity to do something a little bit different and get some more revenue on board the aircraft," Nocella said.

The demand surge has extended to American, as well, though chief revenue officer Vasu Raju has expressed less certainty about whether the change is structural or temporary.

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