It has been a difficult two years for Delta Air Lines. As traffic all but disappeared,
the carrier entered crisis mode, scrambling to manage near-term capacity. Over this time,
several trends became apparent with premium cabin bookings and revenue coming back strong.
This has renewed Delta’s push to drive for an expansion of its premium-focused revenue.
Speaking at Delta’s investor day in December, various executives discussed this premium-focused
strategy and how it has paid off. In the aftermath of the merger with Northwest Airlines,
the carrier started to make a push to drive up its revenue from premium cabins
and thus its premium brand positioning.
By 2014, Delta reported a 55% domestic first class paid load factor. In 2019, Delta had
raised that to 63%. Come 2024, the airline expects to see that number in the high 60s.
Premium cabin margins have been performing roughly ten points ahead of economy margins,
indicating resilient demand for products that offer more space
or an upgraded experience. At the same time, Delta’s strategy has a solid track record
and its overall first class paid load factor has increased.
Delta Air Lines is doubling down on its strategy even further with a focus on
revenue and seat capacity. In 2014, about 24% of Delta’s revenue came from premium cabins.
By 2024, Delta wants to grow that to 36%.
Increasing its average fleet gauge from an average of roughly 97 seats per
aircraft in 2009, Delta plans to get to over 150 seats per departure.
In 2021, the airline is sitting at approximately 131 seats per departure, buoyed by an expanded
fleet of higher-gauge Airbus A321s that replaced the aging McDonnell Douglas MD fleet.
In 2009, roughly 9% of Delta’s available seats were considered premium (above economy class).
In 2021, Delta is sitting at roughly 27% of its seats as premium across its fleet.
As average aircraft capacity increases, over 30% of its seat mix will be a premium cabin.
Delta has worked on segmenting its product and offering a variety of fare structures
with its four premium products: Comfort+ (extra-legroom economy),
Premium Select (international premium economy), domestic first class (a recliner-style product
that is similar to Premium Select), and Delta One (international lie-flat business class).
Note that first class and Delta One are usually not available on the same routes, as the former is
designed for domestic and near-field international flying, while Delta One is reserved for the most
premium domestic routes and long-haul routes. Given this segmentation and expansion of premium
seat counts, Delta will also be able to offer more premium products at more price points.
President Glen Hauenstein explained the growth of premium seating, saying:
“Every time we retire a 50-seat airplane, every time we bring on a new A321,
we are improving the customer experience, improving the ability to sell premium.”
In short, Delta’s push to be a premium airline continues. The airline has plans
to keep growing its premium seat count and offerings over the next few years. While
the premium fare and upgrade ecosystem may look different, the sum benefit should be
more options to buy into and guarantee a more refined product over standard economy class.
What do you think of Delta’s strategy? Is it the way to go? Let us know in the comments.