Delta says segmentation coming to high-end cabins

Delta Air Lines is studying latest varieties of airplane tickets — this time within the premium cabins on the front of the plane.

Airlines spent years slicing up their coach cabins, from extra legroom seats to bare-bones basic economy fares that do not allow changes or include a seat project. Delta was a pioneer within the U.S. when it launched basic economy fares greater than a decade ago with rivals United Airlines, American Airlines and others following suit.

But now airline executives are turning their focus to their premium cabins, where demand is holding up higher this yr than behind the plane.

“Premium has definitely been where our margins have continued to expand, and so we’re highly focused on continuing to offer improved service to those customers and more segmentation,” Delta President Glen Hauenstein said on an earnings call with analysts on Thursday. “The segmentation that we have done in foremost cabin is form of the template that we will bring to all of our premium cabins over time because different people have different needs.”

Delta’s revenue from premium seats like business class rose 6% in the primary half of the yr to $10.6 billion, while foremost cabin economy ticket revenue dropped 4% to $11.7 billion. The carrier, essentially the most profitable U.S. airline, has said for years that its share of sales from high-end seats and its lucrative loyalty program has been growing.

U.S. carriers have largely ditched international first-class in favor of larger business-class cabins, where lie-flat seats have more amenities than seats of past many years.

Hauenstein declined to detail possible changes to the premium seats. It isn’t clear whether Delta would consider a less expensive first- or business-class ticket that may not include perks like lounge access or seat assignments, or a potentially greater seat that would include add-ons that standard tickets haven’t got.

But Hauenstein said Delta is testing some possibilities on customers and surveying travelers.

“We’ve not rolled it out yet, not because we haven’t got the technological capability, but we would like to make sure that that customers understand what we’re putting in market and that they find value in it,” he said.

Henry Harteveldt, travel consultant and president of Atmosphere Research Group, said he isn’t convinced that Delta would consider a stripped-down premium fare.

“Airplanes are expensive … and it’s lots easier while you give your passengers a reason to pay you more in your product than to pay you less,” he said.

Other airlines are working to outfit their top-tier cabins to supply a number of seats which have extra room and even space for a visitor, like United’s planned update to its long-haul Polaris cabin and American’s latest seats on a few of its Boeing 787 Dreamliners.

Delta’s partner, Virgin Atlantic, offers the “Retreat Suite” on the front of its Airbus A330’s Upper Class cabin that might be converted “so as much as 4 people can enjoy an intimate dinner together in their very own private social space.”

When asked whether Delta will update a few of its highest-end seats, CEO Ed Bastian told CNBC Wednesday that “the premium products have had life cycles … and what we thought was state-of-the-art six or seven years ago now not is.

“We’re continuing to upgrade and update it. In order that’s a part of the price of business,” he said. “But our product shall be very, very nice.”