TAIPEI: Lufthansa Group CEO Christoph Franz says the airline industry is being irrational with its approach to full-flat business class seats, with most carriers upgrading their product to a less dense configuration despite being unable to command a yield premium to justify the change. While he does not doubt the improved passenger experience, he says from an industry perspective mass adoption of full-flat seats is “an unfortunate development”.
Lufthansa will further reduce overall seating density with a new premium economy product, for which it is about to select the seat for in advance of an early 2014 announcement.
Lie-flat seats rolled out early last decade on British Airways and Virgin Atlantic on the popular New York-London business market. “They can ask for double the yield level as in other destinations,” Franz says in Taipei on the sidelines of EVA Air’s joining ceremony. The higher yield allowed them to remove seats, decreasing density, to accommodate the extra space needed by lie-flat seats.
“If you are not able to achieve very high yield premiums, you should not do this. From an industry perspective, this is an unfortunate development,” Franz says. “From a customer perspective it’s fantastic but from an entrepreneur perspective with a target to make money you should think twice. But this is not the dominant perspective of our industry.”
Lufthansa has been caught up in what Franz terms the “tendency for permanent upgrading”. Lufthansa’s new full-flat product debuted on the 747-8i and the first retrofitted A380 should be in service in northern winter, possibly as early as Christmas. Lufthansa intended for the seats to be delivered line-fit on A380s but “seat manufactures unfortunately were not able to deliver the necessary quantity in time,” Franz says, reflecting the current bottleneck in premium seating. There were also certification challenges.
The retrofits will be conducted alongside the A380’s wing rib crack repairs and will be a gradual process over a few years for the rest of the fleet. “The bottleneck is we can do this equipment change only in wintertime when we have less traffic and we can put down some aircraft,” Franz says.
Lufthansa’s retrofit for its forthcoming new premium economy class should be faster “because you don’t need to change structural elements to the same extent,” Franz says. The carrier is about to select its seat, which will be an off-the-shelf, not bespoke, option. The early 2014 announcement should be followed with a mid-year roll-out, which will see Lufthansa join a number of European and foreign peers in offering the cabin.
“Sometimes you are only a follower in some of these trends, this is true,” Franz says candidly. “Let’s be honest. The business environment has changed. More and more premium economy is available on many carriers. That was the reason why at the end of day we decided we have to adapt to that market trend.” Franz also attributes the decision to proceed with premium economy a result of the carrier feeling “more comfortable” about securing a yield premium as well as there being a larger gap between economy and its new full-flat business class offering.
Also in the fleet space, Lufthansa still expects to make a decision on medium-sized widebodies by the end of the year, with the candidates being the A350, 777-X and 787.
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