Refundable tickets, extra leg space, and free boozy beverages have featured prominently in airlines’ multiyear strategies as executives announce new premium passenger investments to woo travelers and investors.
During Delta Air Lines’ (DAL) 2024 investor day, the company laid out its vision for a “customized experience” for travelers. Delta said it expects premium ticket revenue to exceed main cabin ticket revenue by 2027.
“Just to be clear, we’re not going to have more premium seats than main seats,” CEO Ed Bastian said at a media roundtable, noting that premium revenue will be more diversified. “Premium could be the American Express card transaction. It could be our [seat] load. It could be other ways in which we transact or engage with customers in our ecosystem as compared to just main cabin, which used to be the dominant form in our industry.”
Delta believes the premium push will impress customers and lead to margin improvement — a key metric shareholders track to gauge earnings growth.
The airline anticipates 85% of revenue growth in 2025 will come from the additional premium seats, which may help the business meet or exceed its pre-pandemic average operating margin of 14%.
Delta’s revenue growth from premium offerings has continued to outpace revenue growth in the main cabin. In the third quarter, revenue from premium ticketing grew 4% year over year to $5.3 billion, compared to a 5% decline in main cabin passenger revenue, which came in at $6.3 billion.
The airline is prioritizing premium experiences as 5% more travelers have taken to the skies in 2024 than in 2023, based on TSA throughput data.
“The industry is actually catching up with the ability to sell its products in a very different way,” Delta president Glen Hauenstein said. “And so we’re going to try our darndest not to alienate customers as we move along this, but just provide them more choice.”
Delta isn’t the only air carrier piloting perks-forward experiences.
JetBlue (JBLU) management recently detailed additional steps it took to generate demand with premium consumers.
“Our premium offerings between preferred seating, even more space, and Mint [its first-class seating] all continue to perform well, further evidence that our customers’ desire for premium offerings is healthy and growing,” JetBlue CEO Joanna Geraghty told shareholders during the company’s third quarter earnings call.
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Meanwhile, United Airlines (UAL) continues to see premium cabin revenue outperform the rest of its travel tiers during the third quarter and record levels of spending among co-branded credit cardholders.