Airlines innovate: Air New Zealand upgrades, Qantas downgrades

WOULD you pay for three economy seats to get a taste of some business class comfort? Air New Zealand (Air NZ) believes there will be a demand for its “Skycouch” where the seats can unfold to make a bed. This comes with a thin mattress and full-size pillows. The airline’s new Boeing 777-300 planes will be equipped with skycouches in the first 11 rows of the economy cabin, making up a quarter of all long haul economy seats.

Interestingly, Australia’s flag carrier Qantas is reducing its first class capacity by some two-thirds to increase economy class seating.

Both airlines are actually moving in the same direction. The recession has taken a toll on premium travel – not surprisingly that budget carriers are enjoying a healthy spin-off from the big boys – and full-service airlines are refocusing attention to where the money flies under present belt-tightening conditions, at least until the good times return with some certainty.

The real question is: Which segment of air travel will emerge as the new cash cow?

What both Air NZ and Qantas are doing is not something new. For many years, commercial air travel generally comprises only the two classes of first and coach until an in-between third business class is added. The popularity of the new class has led to some airlines reducing first class capacity or removing it completely to make room for more business class seats.

Singapore Airlines (SIA) became the first major airline to introduce an all-business class configuration for the long haul, commencing non-stop flights between Singapore and two American cities – New York and Los Angeles – in 2008, unfazed by the earlier failure of upstarts (Eos, MaxJet and Silverjet) which offered cheaper options albeit operating in a different geographical region. It was a bold initiative which other major airlines are still not fully convinced will work, and it was only more than a year later that British Airways (BA) decided to also test its viability, inaugurating an all-business class flight across the Atlantic.

BA chief executive Willie Walsh, who expected the new service to be profitable within a year, said: “In the harshest trading environment airlines have experienced, we believe it is more important than ever to embrace the future and innovate.”

It may be too early to tell whether the BA strategy will work, but what Mr Walsh has said holds the key to surviving the competition, hence too the announcements by Qantas to downgrade and Air NZ to upgrade. With some early signs of recovery, it is to be expected that premium travel will regain some of its lost business. But, to what extent?

Air NZ ‘s strategy identifies a sub-class of travel between economy and business – the skycouch that is more aptly premium economy. The concept is not entirely new. Taiwan’s EVA Air already has a small number of deluxe economy seats that offer more legroom than the normal economy seats. SIA operated executive economy between Singapore and Los Angeles before converting the flights to an all business-class configuration.

What Air NZ has done is raising the creature comfort to further differentiate the product. It may well be the emergence of a new class of its own, the way that the business class originated. (As an aside, it is impressive how this airline operating out of a remote corner of the world is beginning to break through the clouds to be noticed: remember the avant-garde safety video it produced some six months back that became the talk of the sky for a while?)

The recession has changed the patterns of air travel somewhat. Airlines must adapt quickly to the shifts and continue to innovate to keep flying. There is a painful lesson to learn from the bankruptcy of Japan Airlines – even an airline reputed for its traditional brand of quality service cannot afford to stand still.


About David Leo
David Leo has more than 30 years of aviation experience, having served in senior management in one of the world's best airlines and airports. He continues to maintain a keen interest in the business, writes freelance and provides consultancy services in the field.

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