Why airlines are adding more premium seats than ever

Over the past decade, airlines have added more premium travel capacity than ever. Walking down the aisles of a Boeing 787 or Airbus A350 operated by any major US airline today will typically involve passing through a lengthy business class cabin (one with enough seats to account for around half of the plane's total floor space) and then through an ever-growing premium economy cabin.

Economy cabins continue to grow smaller, as airlines continue to have more and more premium seats in their aircraft cabin configurations.

Even some low-cost carriers are beginning to get in on the action and target passengers who are in search of an upgrade. JetBlue now operates transatlantic and transcontinental flights with its Mint cabin, a business-class product that goes toe-to-toe with the premium offerings of many US carriers.

Alaska Airlines, which has had business class for years now, has continued to upgrade its premium offerings, add more seats, and build its lounge network even further.

There is no doubt that momentum in the US commercial aviation industry is heading in the direction of premium travel demand, and passengers are now looking to book premium seats more than ever. In the years following the pandemic, premium cabins accounted for a massive portion of airline revenue growth.

Legacy carriers such as United Airlines and Delta Air Lines, each of which posted some of the best financial results on record in 2024, have attributed much of their success to increased premium demand and the revenue generated from premium cabins.

Therefore, an important question remains: what has led to this dramatic rise in premium capacity, and why have airlines continued to add more and more seats to their premium cabins? To answer this question, we must take a deeper look at the last ten years in the US aviation industry, and evaluate everything that has led legacy carriers to continue adding more and more premium seats.

In 2015, when American Airlines announced it would become the first major US airline to introduce a premium economy cabin, it sent shock waves across the industry. Before this announcement, premium economy had mostly been a cabin reserved for the highest-end carriers in the Middle East, Asia, and Europe.

Premium economy cabins were lavish, and they offered passengers the opportunity to enjoy an elevated inflight experience while paying significantly less than business class fares for the privilege.

In the United States, however, airlines had mostly stayed away from premium economy cabins, with all major carriers throughout the 2000s and early 2010s mostly believing that the market was too weak for such a middle-range premium product.

When American Airlines decided to launch the product in 2016, it had a change in thinking, with Chief Marketing Officer Andrew Nocella stating as follows in a statement to the media at the time:

"Travelers want more choice when they fly and have unique preferences depending on each trip. Our customers tell us they want a class of service between Business Class and Main Cabin, and this feedback provided the genesis for our new Premium Economy service."

American, way more so than its competitors, has been willing to innovate in its premium cabins, as it is the only one to still offer a true international first-class cabin today. The airline was also the first to introduce lie-flat business class and lie-flat first-class seating on its narrowbody fleet.

However, both other major legacy carriers, Delta and United, would go on to introduce premium economy cabins in the following years, matching their competitors' new offerings.

By the time the C.O.V.I.D.-.1.9 Pandemic came around, premium economy cabins were standard on the widebody fleets of all major US legacy carriers, and passengers were beginning to get used to having this new option for a more comfortable travel experience.

During the C.O.V.I.D.-.1.9 pandemic, commercial air travel came to a grinding halt and passengers were left at home without the opportunity to travel, amid lockdowns introduced to keep the deadly virus at bay.

During this period, savings skyrocketed as household expenses in the United States slowed significantly. Furthermore, people continued to earn miles on cobranded credit card purchases and through other airline loyalty program partnership agreements.

When travel did finally open up fully in the summer of 2021 (less so in 2020 as lockdowns still significantly reduced how much people traveled), demand for premium air travel reached all-time highs.

Not only did passengers have a massive number of miles saved up from over two years of purchases with relatively limited opportunity for travel, but the high savings rates of the pandemic meant that people had the cash reserves needed to spend handily on premium seats.

Passengers who had sat at home for nearly two years without a vacation were ready to spend a little extra on their next trip, and demand for premium economy seats shot sky-high as a result.

In business-class cabins, the trend was similar. Traditionally, the majority of tickets sold in business-class cabins are for those traveling for work, flying on tickets that their employers have booked.

However, the remote work era of the pandemic significantly reduced demand for business travel, with many companies electing to save time and money by having meetings on Zoom instead of flying employees across the Atlantic for a sales meeting.

While business travel demand has been slower to recover, high-end leisure travel demand has taken its place, with airlines seeing more and more non-business travelers book seats in their most expensive cabins.

By the time business travel did ultimately return to pre-pandemic levels, the already high level of premium demand from vacationers led airlines to expand their cabins even more.

The more interesting question related to this increase in premium demand, however, is how the airline industry managed to sustain it between 2021 and 2023.

During these years, inflation rose dramatically, and American household savings dropped significantly, which, under most circumstances, would lead to lower demand for these premium seats.

However, airline passengers had grown very accustomed to the additional comfort associated with premium seating, and airlines were able to keep passengers booking their more expensive options.

During times when premium bookings are low, airlines can upgrade passengers with status, helping keep them loyal to the airline and spending money on credit cards with annual fees that range up to $650.

In 2024, amid improving economic conditions, premium travel demand once again reached sky-high levels and was one of the major factors driving the industry's impressive financial success throughout the year. Delta Air Lines described the importance of premium demand in 2024 as follows:

“Consumers are continuing to prioritize premium experiences… premium products are really doing much better currently than coach.”

According to data published by the International Air Transport Association (IATA), business class fares rose to five times that of economy ones on average in 2024. Despite only accounting for 3% of travelers globally, those in business class cabins account for over 15% of airline revenue, and the number only continues to grow.

Across the board legacy carriers will need to continue capturing this ever-increasing premium demand segment in order to stay ahead of the competition.