The ‘Premium Economy’ route is being considered by Indian airlines as a way to boost sales and profit margins on their flights to the UAE.
Emirates has announced that it will start doing this in October on its flights to Mumbai and Bengaluru, focusing on business travelers on a budget, VFRs (visitors to friends and relatives) looking for comfort, and leisure travelers.
Introduction of Premium Economy
The Premium Economy cabin class has the highest total marginal returns on long-haul flights, generating 2.3 times as much income as its production cost. Its production and implementation costs are 1.6 times more than those of an economy seat.
However, the decision to offer a Premium Economy service by low-cost carriers like IndiGo and SpiceJet rests on a rigorous examination of customer demand, operational viability, and prospective profitability.
- Indian airlines explore the ‘Premium Economy’ route to boost UAE sales.
- Premium Economy cabin class generates higher marginal returns on long-haul flights.
- IndiGo and SpiceJet explore the Premium Economy market, adopting a hybrid strategy.
On a few long-haul flights, Vistara and Air India provide Premium Economy services, however, it is unclear whether Vistara and Air India will merge. In March of this year, Air India introduced a Premium Economy service, but it was only available on India-US routes.
The expansion into the Premium Economy market by low-cost airlines like IndiGo and SpiceJet could result in a dramatic change in their business strategy. It would be viable to adopt a hybrid business strategy like flydubai, which provides both Business Class and Economy.
It’s not impossible that Indian low-cost carriers would soon introduce a premium offering, as IndiGo may decide to reverse course and pursue a hybrid strategy to compete with Air India.
Business travelers, vacationers, or frequent flyers between the UAE and India who value comfort and extras may be drawn to the service. As users of the service gain confidence in it, together with India’s expanding middle class and rising propensity for travel, the demand for the service may steadily rise.
