U.S. Markets open in 23 mins

Why class warfare on airplanes is here to stay

Planes used to have two classes — first class and economy. Today, some airlines have as many as six different classes. 

Cabin segmentation on airplanes seems to be unstoppable, with business class seats getting bigger, and economy seats getting smaller.

Case in point, on Tuesday, Qatar Airways just unveiled the first double beds in business class, enabling passengers to have sleepovers in the air. The cost of securing this spacious 79-inch bed starts at $4,326 for a round-trip ticket. On the other hand, JetBlue Airways (JBLU) announced this month that they are squeezing a dozen more seats into economy class on their A320 aircraft. Last May, American Airlines said it would decrease the economy seat pitch (distance between seats) to 29 inches from 31 inches on in their new Boeing 737 Max Jetliners.

Divvying up airfare into different classes allows an airline to make more money by selling premium seats to high-paying customers, and squeezing more low-paying passengers into economy class.

While cabin segmentation has angered passengers, Ed Bastian, CEO of Delta Air Lines (DAL) says that a “one-size fits all” approach is no longer effective for airlines. They had to figure out a way for customers to make a connection between how much they get for how much they pay.

“Ten years ago you’d have a business traveler paying $800 and sitting in a middle seat, next to someone who bought their ticket six months earlier sitting in the aisle seat for $69,” Bastian said at the Skift Global forum, an annual travel conference. “You have to find a way to create differentiation in consumer minds, and you have to give them choice.”

Delta currently has six different classes available: Delta One, Delta Premium Select, First Class, Delta Comfort, Main Cabin, and Basic Economy. Prices vary in each class, but the same round-trip ticket from New York to Los Angeles could range from $321 in Basic Economy to $2,653 in First Class.

The trend of offering different seat classes at various price points looks like it’s here to stay. Earlier this year, both American and United unveiled Basic Economy seats that sell for a cheaper price but strip away the travelers’ right to select their seat or rebook the ticket. For Bastian, the idea of giving away premium seats for the same price as economy seats, or even upgrading frequent flyers for free, is no longer a profitable option.

“Any business where you give the majority of your best product away for free doesn’t work,” he said. “This is the best real estate on the planet, and while we appreciate the loyalty of flyers, we couldn’t continue to give it away.

Airlines will use extra cash to upgrades

Delta Air Lines CEO Ed Bastian during the groundbreaking ceremony of the construction on Delta Air Lines at LaGuardia Airport.

The one silver lining for customers is that it appears as if some of the money airlines earn will go back to improving operations. The airline industry took a huge hit during the recession, and during that time, investment into infrastructure was put on the back burner. Now, airlines have the opportunity to make investments.   

“We’re putting $4 billion in the capital of this company, meaning, investing in new airplanes, technology, and security. We broke ground last month on the new LaGuardia facility,” said Bastian.

Delta contributed $3.4 billion towards the 37-gate facility at LaGuardia Airport in Queens, N.Y., which the airline says is one of the largest private investments in a public asset in New York state. The terminal will feature a new Delta Sky Club, 30% more concession space, and new technology.

“We’re investing a lot because we gotta make up for lost time,” said Bastian. “We’re working well with what we got and we’re continuing to make more and more progress.”

Brittany is a reporter at Yahoo Finance.

Basic economy seats: Is the discomfort worth the savings?

American Airlines introduces Basic Economy class. Is it worth it?

American Airlines invests $6 million in new 3D airport scanners