Take a Boeing 757, remove 40% of the seats and give customers lots more room, better food and flat beds. Does that sound like a typical recipe at a US airline these days? Hardly, but that’s exactly what United Airlines did with two of its busiest, most important routes, and last year they were the best routes financially for the airline in the country.
Illustration: Jayachandran / Mint
In late 2004, United launched an experiment converting all its flights between New York and Los Angeles and New York and San Francisco into a premium service it calls United p.s. With p.s. flights, half of the entire cabin is devoted to first- and business-class seats, and the space offered to passengers is close to what you get on premium international offerings (p.s. has the only domestic lie-flat bed in first class). “It’s been a home run in all perspectives,” says John Tague, United’s chief operating officer.
Many passengers love it. After visiting clients in San Diego, Carol Ruth took a commuter flight to Los Angeles to catch a p.s. flight back to New York rather than fly directly home from San Diego on Delta Air Lines Inc. or AMR Corp.’s American Airlines. A recent flight in first class on Delta didn’t come close to what she enjoys about p.s. business class.
“On Delta, I was complaining, ‘Where are my headphones? Where is my legroom?’” says Ruth, president of a PR firm (p.s. business-class seats have 16 inches more legroom than Delta’s domestic first class).
“P.s.” shows that at least on some routes, domestic US travellers will pay extra for very nice service, and not just chase the cheapest fare (p.s. fares go as high as $3,235 or Rs1.36 lakh round trip for business class, and $5,167 for first class). That may become an important lesson as airlines struggle with high oil prices and push up ticket prices. To get business travellers to pay more and not simply shift to discount airlines, big airlines may have to find ways to offer premium service that travellers will value—something different from what they can get on the cheapest ticket, and yet better value than sky-high domestic first-class tickets.
Andrew Watterson, a partner at the airline practice of Oliver Wyman, says that to weather the current crisis, airlines are going to have to find more ways to simultaneously cut costs and boost revenue—what United did with p.s.
“It’s a great example of finding a situation where people will pay more for a better seat,” he says. “There are select markets around the world where you can have these kinds of products.”
The number of markets in the US is probably small, however. Airlines need long flights and lots of business travellers to make premium service offerings work. And in the midst of the current financial crisis, officials say it is unlikely airlines will be investing in new products.