American Airlines has really just begun dipping their toe in the water with their new Premium Economy product. They first announced plans to roll out Premium Economy in late 2015. We also learned some basic seat selection tips early on.
Now that American has the Premium Economy product rolled out on a number of planes, there are early indications that the customer demand is exceeding expectations.
JonNYC is normally a good source of information for all things American. He tweeted out yesterday:
Thus far, Premium Economy is a notable success story for AA, I think to a surprising degree even– very full on a high % of applicable flights at fares that make the airline happy.
— JonNYC (@xJonNYC) December 31, 2017
That isn’t terribly surprising to me. American Airlines had a loyal following of higher end customers for years. There was a period of time (post-United/Continental merger) where the catering and customer service on American was significantly better than on United.
Even though service levels have regressed a bit, I have to imagine there are still enough premium customers on American Airlines willing to pay a bit more for an upgraded experience.
The Final Two Pennies
I’ll be interested to see how American reports Premium Economy results during their next quarterly earnings call. At their recent media day they lumped Basic Economy and Premium Economy revenue in together with each other.
I actually think it’s a mistake to think of those two products together. Basic Economy isn’t a failure but it’s clearly had some issues during rollout. It also demphasizes what was an advantage for American for years, their premium service and offerings.
Premium Economy is a great way to extract revenue from customers by offering them more. It’s a far better strategy than taking away from what they used to get. Increased legroom, better catering and in-flight amenities can help retain customers for the long haul. Delta appears to be seeing some success with Premium Economy as well.
When airlines compete on flight times and prices, they have to earn a customer’s business each time they consider booking a ticket. With unique offerings that customers enjoy, they stand a better chance of solidifying customer loyalty.
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