With lower income Americans struggling amid a worsening economy and growing inflation, airlines are betting big on premium passengers to navigate the current U.S. economic swing.
It’s a strategy the airlines followed after the pandemic in order to sure up revenue and insulate themselves from economic fallout – and its working amid the country’s current economic woes once again.
Carriers that have premium seats aboard their planes are maintaining profitability at the moment, despite a slump in travel demand, per a report from Reuters. This is due largely to the fact that premium travelers have not felt the pinch from the slowing U.S. economy or increasing cost of living under the Trump Administration.
Delta Air Lines, for instance, reported a 5 percent year-on-year jump in its second-quarter premium ticket revenue last week. That’s compared to a 5 percent decline in its main cabin revenue for the same time period.
The 10 point percentage gap between the two cabin revenues is the most significant since the pandemic, according to Reuters.
Meanwhile, United Airlines premium cabin sales helped the airline through the hit it took from the recent Newark airport meltdown. The airline was still able to increase its earnings for the latest quarter despite the significant cost of the Newark incident. Its premium revenue increased 5.6 percent in June from the same time a year ago. Yet the carrier’s overall passenger revenue for the same time period increased just 1.1 percent.
“Premium capacity remains resilient,” United’s Chief Commercial Officer Andrew Nocella, has said, according to Reuters.
Bolstering Nocella’s point, U.S. households that report earnings of $100,000 make up about 75 percent of air travel spending.
Along with that, Bank of America data shows that spending by middle- and higher-income households remained steady for the month of June. By contrast, lower-income household spending is negative.
At the same time United and Delta have reported gains in their premium revenue segment, budget carriers have struggled. Low-cost carrier JetBlue is currently planning new budget slashing efforts as demand slows, while Frontier and Spirit Airlines are busy cutting flights.
Some budget carriers have taken notice of how premium seat offerings can help airlines navigate difficult economies. Alaska Airlines is busy expanding the number of premium seats on its planes to 29 percent.
For the latest travel news, updates and deals, subscribe to the daily TravelPulse newsletter.
