Introduction
The economy class (EC) is crammed to allow physical movement, while the business class attaches a high price tag for its comfort. The concept of the premium economy (PE) class aims to bridge the gap between the business and economy classes (Hugon-Duprat & O’Connell 2015; Kuo & Jou 2017). At present selected number of airlines are offering this innovative PE class such as Singapore Airlines, Virgin Atlantics, Japan Airlines, Cathay Pacific, and British Airways to name a few (Morrell 2008; Hugon-Duprat & O’Connell 2015). Though the concept of PE has picked up recently with major airlines announcing the addition of PE as an option for their passengers, the concept was initially introduced in the 1990s by the UK’s Virgin Atlantic and Taiwan’s EVA Air. Figure 1 shows a standard layout of all classes’ seating of Cathay Pacific.
In a bold move, Emirates plans to offer a PE class to attract customers with tighter budgets. Emirates has long offered luxury class but the declining oil revenues have impacted the passengers’ budget to afford first and business class. With other airlines offering more options to the passenger with a tighter budget, Emirates looks to fill this gap and retain its customer base. In this respect, this report offers a review of PE class and its possible impact on the overall design and economy of Emirates. First, this study offers a comparative study of various types of premium classes available. Second, this report looks at the impact and suggests the routes beneficial for offering PE class.
Attributes, Merits, and Disadvantages of PE
First, it is important to understand what the Premium Economy (PE) Class is. It provides more features than the EC; however, it does not provide all the features of the business class. The PE provides 1 to 2 inches of extra pitch with wider seats than the EC. Also, PR seats recline and have adjustable headrests. The PE class offers an average pitch (legroom) of 38 inches and a seat width of 18 inches (Paris 2017). This is substantial compared to EC seats, which offer an average pitch of 30 inches and a seat width of 18 inches (Paris 2017).
Additional features as well as services come with PE depending on the policies of airlines such as larger personal video screens, additional food choices, and power port for electronic devices. Table 1 shows the basic features of PE class offered by different airlines. They vary from one airline to another. For example, almost all the airlines provide the amenity kit to PE passengers with socks and eyeshadow. However, only selected carriers to offer the privilege of early check-in, blanket, and a free meal. Further, the price of the PE is higher than EC; however, the fare difference can be 50% to 120% higher (Josephs 2016). Therefore, it can be concluded that through PE class fills the gap between the economy and business class, its implementation varies among airliners.
Table-1 Premium Economy Class features (Josephs 2016).
Characteristic Design and Economy of PE
Present Emirates fleet comprises Boeing A380, Boeing 777-300, 777-300ER, and 777-200LR. With the inclusion of PE class and fleet space remaining the same, it is likely to reduce the number of seats per row. The decrease in the number of seats can impact total fare collection. For example, presently Emirate’s Boeing 777-300 has a passenger capacity of 364 (12 First Class, 42 Business Class, and 310 Economy class seats). Figure 2 shows Emirates seat distribution for its Boeing 777-300. A single row of business class has 7 seats, while a single row of an EC has 10 seats.
Let us consider two design scenarios to analyze the impact of design and economy of PE:
- The case I: Consider half of the EC seats are converted into PE class.
- Case II: Half of the Business class capacity is converted into PE class.
It should be noted that a standard PE class of Being 777-300 can accommodate 8 seats in a row. Under the first scenario (Case-I), the total number of seats will reduce from 364 to 330 as the existing 33 rows of economy class seats will be converted into PE class, which will replace 155 seats (half of EC capacity) with 90 PE class seats. Therefore, the total capacity of Boeing 777-300 will reduce from 364 to 329 (12 FC+ 42 BC + 120 PE + 155EC). This will lead to loss of income coming from the economy class seats.
On the other hand, the second scenario (Case-II) will convert half of the business class seats to premium economy class. In other words, 32 out of 64 business class seats will be converted into premium economy class. This will increase the total capacity of Boeing 777-300 from 364 to 367 (12 FC+21 BC+ 24 PE+ 310 EC). The second scenario shows that converting business class increases the total number of sets marginally. On the other hand conversion of economy class seats into premium economy class reduces the total number of seats.
Route Selection
Research studies show that the premium economy class can be most effective in long-haul aircraft carriers (Wensveen & Leick 2009; Hugon-Duprat & O’Connell 2015). For example, Singapore Airlines offers its premium economy on long-haul routes such as from Singapore to Paris, Munich, Manchester, Sydney, New York, and Los Angeles (Rosen 2015). Therefore based on industry practice and Emirate present routes, this report proposes the following three routes for implementing premium economy class:
- Route-1: Dubai to New York
- Route-2: Dubai to Paris
- Route-3: Dubai to Singapore
Selections of these three routes are based on multiple factors. First, these are the most frequent destination for most travelers to and from Dubai. Second, the business class travelers with a tighter budget will get an option of a premium economy that would fit in their pockets. Besides, other airlines have been offering premium class options to their passengers on these routes. Thus, Emirates offering premium class will even out the competitive edge other carriers avail in these routes. An in-depth economic analysis is provided in the following sections on the feasibility of these routes and premium economy class.
Premium Economy Seat Section and Layout
The new premium economy class should be placed in the transition zone between economy and business class as shown in figure 2. This would require minimal changes to the existing amenities such as the gallery, toilet, and service space. Nevertheless, there will be reduced space for the movement from the new premium class to business and economy class due to wider seats per row. Based on the industry-standard, the premium economy class should consider JDA Design seats, which offer leather seats, leg rests, adjustable headrest, and larger leg space (Garcia 2015; Drescher 2015). Table -2 list the detailed design feature of JDA Design premium economy seats. With the new seats, Emirates can expect 2-4-2 premium economy seats per row.
Table 2: Design features of the proposed premium economy class seat (Drescher 2015).
Feasibility
This study proposes to install the PE class by replacing 5 rows of popular EC and 2 rows of business class. Feasibility test results are presented here by considering the economic viability of the proposed configuration. Table 3 shows comparative revenue of present configuration and proposed configuration. This study only considers the change in generated revenue for the section under consideration (Figure-2) because revenue from the remaining section of the flight will remain unchanged. The primary objective of this analysis was to estimate the optimal price of a premium economy class for a break-even situation. Results show that Route-1, Route-2, and Route-3, at present, generate $78448, $65640, and $37752 with 14 business class and 40 economy class seats. Now, these 14 business class and 40 EC seats will be replaced with PE class 48 seats. From Table 3, the data price of each PE class seat can be calculated for a break-even situation. The estimated price for each PE class seats for Route-1, Route-2, and Route-3 are $1634, $1368, and $787 respectively.
Table 3: Feasibility analysis of present and proposed seating arrangement for the three selected routes.
The feasibility study shows that the price of PE class seats would be higher than the present ECs i.e. for Route-1, Route-2, and Route-3 the price would be higher than EC by 150%, 157%, and 223% respectively. Nevertheless, the new PE class will offer a lower price option to a business class traveler who has a tighter budget and looks for comfort. Also, the new PE class will attract EC travelers who look for comfort but cannot afford business class.
Findings and Conclusion
The new PE class segment is much needed to improve Emirate’s customer experience and retain its frequent fliers. With the decreasing oil price, most business class travelers are tight on their travel budget. With the introduction of PE class, Emirates will offer the best fit option to its customers and will be able to compete with other carriers who have already started to offer PE classes in selected routes. This study looked at the advantages and disadvantages of a premium economy class in comparison to business and economy class.
A feasibility study was conducted to estimate the economic impact of introducing the PE class. Results show that the PE class fills the gap between the comfort of the business class and the competitive price of an EC. In this respect, three routes were considered for implementing PE class based on their viability: Dubai to New York, Dubai to Paris, and Dubai to Singapore. This study proposes to select a space between economy and business class and convert it into a premium economy class. From the selected section, the Emirates collects $78448 for a round trip on the Dubai-New York route. To break-even, Emirates will need to price a single premium economy seat 150% higher than economy class. Similarly, the price of premium economy class on 2nd (Dubai to Paris) and 3rd (Dubai to Singapore) proposed routes will be 157% and 223% higher than the economy class.
Though the price of premium economy class is slightly higher than the economy class, the passengers looking for additional comfort will be able to get the facilities at a lower cost than the business class. Besides, this new segment will help the struggling economy hit with a plunge in oil prices. Emirates has long been a major player in the luxury segment, but with changing dynamics and passenger requirements, Emirates will be at a loss if it does not implement innovative and competitive technological changes such as the premium economy class. Results clearly show that with a slight increase in price customers can avail better facilities, at the same time; Emirates need to strategize the design of new seat to facilitate better movement and optimal utilization of the available space. The study clearly shows that the phase-wise introduction of premium economy class into the present layout can benefit both the carrier and customers. As future work, this report possesses an in-depth analysis of premium economy class economic viability on shorter routes, which is majorly driven by economy class. Inclusion of premium economy class, on one hand, attracts business class passengers looking to save some money, and on the other hand, it provides much-needed gradient to the economy class passengers who look to have a better facility at a cheaper price.
Personal Learnings and Insight
The assignment was useful for understanding the requirement of the premium economy class. The assignment helped me develop analytical and reasoning skills. I was able to use my design, decision making, and research skills. This project conducted the feasibility study for only one selected section and configuration of a premium economy class. I would like to compare various other configurations. There are limited published reports on the premium economy class. Such projects require data from validated sources, which was lacking as the section is new and still developing.
Reference List
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Emirates 2017, Seating charts, Web.
Garcia, M 2015, ‘Happy medium: JPA design explains why airlines should make premium economy differentiation count – part three’, Apex, Web.
Hugon-Duprat, C & O’Connell, JF 2015, ‘The rationale for implementing a premium economy class in the long haul markets–evidence from the transatlantic market’, Journal of Air Transport Management, vol. 47, no. C, pp. 11-19.
Josephs, L 2016, ‘How “premium” is premium economy? A guide to choosing that upgrade, airline by airline’, Quartz, Web.
Kuo, CW & Jou, RC 2017, ‘Willingness to pay for airlines’ premium economy class: the perspective of passengers’, Journal of Air Transport Management, vol. 59, no. C, pp. 134-142.
Morrell, P 2008, ‘Can long-haul low-cost airlines be successful?’ Research in Transportation Economics, vol. 24, no. 1, pp. 61-67.
Paris, N 2017, ‘Which airline is number one for premium economy? The answer might surprise you’, The Telegraph, Web.
Rosen, E 2015, ‘Review: singapore Airlines 777-300ER in Premium Economy’, The Points Guy, Web.
Wensveen, JG & Leick, R 2009, ‘The long-haul low-cost carrier: a unique business model’, Journal of Air Transport Management, vol. 15, no. 3, pp. 127-133.