Covid-19 Crisis: First Class Isn’t Dead Yet!

Many First Class passengers are expected to make the leap to private jets in the wake of the pandemic, says Linus Benjamin Bauer, managing director of Bauer Aviation Advisory

The current COVID-19 pandemic has sent shock waves through the entire aviation industry including the airlines with First Class offerings.

It’s also not clear to what extent the premium market (First and Business Class combined), which generated 30% of airlines’ international revenues in 2019, can recover. For many airlines across the globe, business travel has not yet returned in any meaningful way.

Some overseas routes have resumed, but traffic worldwide has barely started to creep back. According to IATA, International passenger demand was down 92% in July. The overall average load factors on the international long-haul flights were between 40-50% to date.

Travelling as a First Class passenger during the pandemic isn’t what it used to be. Airlines’ and airports’ efforts to minimise human interaction and reduce the risk of infection are taking the shine off the most expensive seats onboard commercial aircraft like the Airbus A380 and Boeing 777-300ER.

Downgrade of Premium Offerings

Some airlines have used the pandemic to permanently downgrade their offerings for the First Class customers to save money. Gone are the multi-course banquets and warm personal service in the First Class lounges, once the hallmarks of carriers like Emirates, Etihad Airways, Qatar Airways, Singapore Airlines and Cathay Pacific.

These days, what’s left of premium-grade travel is functional, hygienic and closer to cattle class – only with more legroom.

The limitations are one more headache for the airline industry grappling with a near-total collapse in demand and follow years of luxury one-upmanship among carriers across the globe in a contest for the most profitable passengers.

All of sudden, it is harder to tell airlines apart when passengers are up the pointy end. That’s making it tougher for carriers to win top-paying customers, and risks pushing some to the lower cabin class – the evolving Business Class – or to private aviation.

Hungry private jet operators

During the pandemic, the very hungry private aviation companies do offer comfort and flexibility, as well as isolation, as separate terminals with living-room ambience and boarding areas are nothing out of the norm (e.g. JETEX Premium Terminal at DWC). In light of the recent pandemic, the isolation, flexibility, and sometimes even unprecedented access pushed business aviation to recover very quickly compared to its counterpart, the commercial airlines with First Class offerings.

The quick-paced recovery of business aviation during the pandemic does showcase that those who are able, are also willing to spend extra to be safe while traveling. According to JETEX’s CEO Adel Mardini, 70% of their (new) customers are coming from First Class and these people will fly First Class again, at least for the coming five years. Passengers with a higher willingness to pay have also a higher degree of motivation to travel – may it be for leisure or business.

Suite-Style Business Class

In terms of product offerings and features (e.g. Qatar Airways’ groundbreaking QSuite), the Business Class of various airlines like Qatar Airways and Delta has become the alternative First Class by removing/not considering the First Class in their fleet (now and future). Even before the coronavirus pandemic brought travel to a halt, many airlines were introducing new premium cabins that, often for the first time, included closing doors. Instead of adding the First Class to the future fleet (e.g. A350; B787 or B777X), various airlines will offer its passengers the option to choose from two variants of business class seats (e.g. standard seat and suite-style seat).

Airlines have slowly phased out their First Class seating and replaced it with an expanded suite-style business class offering. The key challenge for many airlines in the past was to achieve a solid ROI from investing in First Class products (on-ground and on-board) since up to 70% of the First Class passengers of various airlines in the past didn’t pay a full-fare ticket for travelling in First Class. The majority of the First Class passengers were upgraded from the Business Class (either compulsory, operationally or by themselves with miles/cash).

Yet airlines somehow need to keep filling First Class seats, or get rid of them. A single First Class seat needs to generate at least three times the profit of a Business Class seat to justify all the space it takes up in the plane.

First Class Isn’t Dead Yet

Despite the ongoing structural change in air travel, the First Class can’t be declared as dead for certain airlines and markets yet. The structural change in the market will lead to new opportunities (e.g. cabin layouts, on-ground/on-board products) in order to recapture that lost premium market share from private jet operators in the post COVID-19 era.

With respect to the downgrade of service and product offerings due to COVID-19, Business and First Class travel may be a waste of money right now

but premium tickets are about to become more valuable and appealing than ever in the post COVID-19 era. This is largely due to space and privacy offered, particularly with the trend for Business Class suites with floor-to-ceiling sliding doors.

Final Thoughts

In the near future, when leisure and business travel begins again, it is likely that the majority of people will return to flying somewhat tentatively, and I believe the added privacy of flying Business or First Class may in fact end up being a reassurance worth paying for. Those passengers keen to keep a safe distance will like the security of the roomier classes. Because privacy (safety) and distance (health) is likely to be in the forefront of many passengers’ minds when they start flying again. For many, ‘fewer’ trips will be the way forward, in favour of attempting to fly in business or first class to create natural social distancing

When travellers return to the skies they will be more conscious than ever before about their personal space, and these airlines will be eagerly waiting to greet them with some of the most spacious and comfortable premium cabins imaginable.

First class passengers are likely want to be away from the crowds, so the reintroduction of exclusive stand-alone First Class Terminals like in former times could be an option for airlines based in heavy premium markets like London-Heathrow.

They do cost an arm and a leg for airline and airport operators, however, the entire landscape and the customer behaviour is changing due to COVID-19 and we have to look at the path towards 2025 and beyond.

Linked to the global GDP growth and growth in propensity to travel, the travel sector has continued to grow and will continue to grow again once the worst of this crisis is over.

The demand for travelling in premium classes will also return to its long-term growth trajectory, linked with the rise of the middle class worldwide. It is highly likely that the COVID-19 pandemic may make people appreciate Business and First Class even more.

Although First and Business Class travellers makes up just a small portion of total air travel, the foundation of the business travel sector travelling in both premium classes is an essential ingredient for the world’s full-service network carriers (FSNCs), reflected by the fact that in 2020 alone, the real value of the segment will shed over $750 – $850bn (IATA, 2020).

Wole Shadare