The rationale for implementing a premium economy class in the long haul markets – Evidence from the transatlantic market

Abstract

The premium economy class is fast becoming an embedded and valued product that is being incorporated into the long haul fleets of the world's flag carriers. The premium economy unique proposition positions itself mid way between economy and business class with enhanced leg room as its primary attribute. It targets the price sensitive business traveller and the comfort seeking leisure passengers. This study contains an insight into the unit cost of production of economy, premium economy, business and first class seats and their potential to generate revenues on the lucrative London Heathrow to New York JFK route using a British Airways 747-400 aircraft. The main findings show that the rationale for implementing a premium economy seat is justified as it is only 1.6 times more expensive than an economy seat to produce, but it generates revenues that are 2.3 times higher than its cost of production - spawning the highest marginal returns from the four cabin hierarchy. The research reinforces the assumption that premium economy class cabins could very well become an embedded and sustainable product in the landscape of long haul travel in the near future.