Emirates pins hopes on premium economy

Emirates Airlines

• New seats on flights to London, Paris and Sydney from August
• More routes, including Christchurch, to follow
• Carrier will become first Gulf airline to offer premium economy

The air travel industry is building momentum after the pandemic and Emirates is demonstrating its confidence by launching a premium economy class on routes to London, Paris and Sydney.

The new cabin class will be available on the high-traffic A380 routes from 1 August, with Christchurch to be added in December.

The Dubai-owned airline said it would provide “luxurious seats, more legroom and a service to rival many airlines’ business offering”. The move makes it the only airline in the region to offer a premium economy cabin.

Industry analysts believe the new offering could attract business and leisure travellers. 

“For many businesses, in a time of austerity and rising prices, it is a neat compromise for business travel,” Andrew Charlton, managing director of consultancy Aviation Advocacy, told AGBI. 

“Secondly, for some travellers, pent up and locked down for two years, it is a way to make the return to travel more attractive, whilst respecting a greater need for social distancing. 

“For Dubai, it is another way to make the destination attractive for Londoners – it reduces the number of economy seats slightly but does so at a slightly higher price.” 

Research from Bauer Aviation Advisory, a management consulting firm based in Dubai, shows that the production and implementation cost of a premium economy seat is 1.6 times higher than that of an economy seat. Yet it generates 2.3 times higher revenues than its production cost, giving it the highest marginal returns across all cabin classes.

• Emirates should be allowed to fly to Berlin, says German exec

“With specific markets and routes commanding a price premium, airlines have been increasingly inclined to deploy strategically configured aircraft, with more significant proportions of the plane dedicated to business and premium economy cabin seats,” Linus Benjamin Bauer, founder and managing director of Bauer Aviation Advisory, told AGBI. 

“The global aviation industry had witnessed an overall decline in yields over the past eight years, having primarily been driven down by capacity growth and lower fares before the world got shaken up by the COVID-19 pandemic. However, yields in the less price-sensitive classes, such as business and premium economy, have been primarily upheld, generating another advantage for carriers having a premium economy class product.” 

The London-Dubai service is already one of Emirates’ most profitable – OAG data shows that Heathrow-Dubai is the world’s fifth busiest international route – but premium economy seats would help it capture revenue that might otherwise have gone to competitors that already offer them, such as Qantas and British Airways. 

The offering could also help Emirates to sustain higher yields as the aviation industry battles uncertainties including the war in Ukraine, rising jet fuel prices and inflation. 

On May 13, Emirates posted an annual loss of $1.1 billion – a sharp improvement on its $5.5 billion loss the previous year – but only the fourth annual loss in its almost 40-year history.

Bauer said: “The entire landscape is changing, and the pack will be reshuffled. By targeting price-sensitive business travellers and comfort-seeking VFR [visiting friends and relatives] and leisure travellers, premium economy has become a value-added product, a significant revenue stream and a strategic mechanism to improve yields on long-haul services. 

“We’ve witnessed the kick-off of an early recovery of the VFR, leisure and ‘bleisure’ [leisure/business mix] segments over the past 12 months, and the travel streams could be used as one of the indicators for demand between specific markets shortly. 

“Emirates could be in a better position with the new premium economy to pick up that demand and gain market shares on critical routes – if other Gulf carriers do not have any plans to launch a premium economy class product shortly.”

• Passengers hit two-year high at Dubai International airport

Emirates currently has six A380s equipped with premium economy. In November, it will embark on a retrofit programme to install the seats on 67 A380s and 53 Boeing 777s, bringing the total number to 126. 

Rabia Yasmeen, a senior research consultant at Euromonitor International, told AGBI: “The launch of Premium Economy by Emirates is a natural next step that strongly resonates with the needs and wants of identified consumer segments on the Emirates flights – especially catering to business class customers and those valuing premium travel experiences on short to long haul flights.

“As Emirates launched the service on three routes with destination cities being London, Paris, and Australia, this not only enhances the value proposition of the airline on leading and most popular routes from Dubai, but also attracts passengers on connecting flights on these routes- which are also connecting some of the busiest airports worldwide.

“As travel returns, there is certainly pent-up travel demand from London and Australia for business and VFR segment as well as Paris for leisure. With pent-up demand, there is also an increased propensity for travellers to opt for safer and comfortable travel experience. Travellers also see greater value in spending money on experiences post Covid.”

On Tuesday the airline said it was “busy meeting and hiring” candidates for cabin crew in 30 cities. Its recruitment drive, which runs until the end of June, is visiting Australia, the UK and dozens of European cities, as well as Cairo, Algiers, Tunis and Bahrain.