Over at Fortune, Christopher Elliott says that suffering economy passengers are subsidizing the perks for premium cabin passengers. In fact he has it exactly backwards. (And I will totally admit up front that I lost my cool reading this.)
Airlines offer top perks to compete for the business of lucrative business travelers who:
- Spend much more over the course of a year, booking 100 flights a year not just two or four
- Spend upwards of $5,000, $10,000, or more on a single premium class roundtrip. (The perks do not cost an airline the difference between the coach fare and the amount paid by these passengers.)
Indeed, it’s this lucrative business that in most cases and for most airlines makes the flight possible. And then they sell excess seats that would otherwise go empty at a deep discount. Since they are going to fly the plane anyway, it is better to get some revenue out of the seat instead of no revenue. Hence the ability to fly cheaply on a major airline.
(Ultra low cost carriers flying leisure routes with far less legroom and many more fees than the major airlines charge are of course a different matter. They pack in lots of passengers and keep costs as low as possible. But those aren’t the airlines Elliott is writing about.)
Elliott begins with his ‘parade of horribles,’ all of the super-luxurious perks that premium flyers have access to. Not a single one is being subsidized by economy passengers, and Elliott doesn’t even have his facts right because some in his own list are available to passengers flying economy!
- “A chauffeured ride” United, Delta, and American all have cars that can drive their most profitable customers (most often Global Services, 360, and Concierge Key respectively, usually flying in paid premium cabins) across the tarmac usually to help them make tight connections in the event of a delay.
- “Your own private entrance” Elliott mentions Delta’s newly completed terminal at LAX which has a premium entrance. American’s terminal there has one too. But he could just as easily criticize premium check-in.
- “Private lounges for the “best” customers” airline lounges are not new of course. The first one opened 75 years ago, and was the result of populist outrage (not the cause of it). Anyone can pay to access most US airline lounges, in fact the very reason why US airlines sell memberships in their clubs is to ensure egalitarianism, that there’s no discrimination in providing access.
- “Onboard butlers and nannies are coming” This one is extra strange. Etihad is most known for flying nannies and offers the service in economy. Etihad also offers the ‘onboard butler‘ only for passengers of their Airbus A380’s single ‘Residence‘ — a flight that costs over $20,000 one way between London and Abu Dhabi. In any case, the butler is simply a marketing gimmick meant to create a ‘halo effect’ for the rest of the airline and certainly not offered at a loss for those passengers buying the seat.
- “Private copter or private jet?” Delta is offering upgrades to private jets on a very limited basis to eek out revenue from positioning aircraft that would otherwise fly empty. In other words, it is a strategy to earn a revenue premium — not something that economy passengers are subsidizing. He also mentions that Continental used to bundle helicopter service to Newark with business class flights as a way of luring downtown passengers especially on the East Side away from JFK. The cool thing? You could even add 10,000 miles to a business class award ticket to get this service.
- “Smart seats that massage you” Umm, sure. United’s business class recliner seats in the mid-1990s offered a massage function. It clearly doesn’t take a subsidy to offer recliner-style business class.
- “No waiting” Elliott reports “Prescreened VIP passengers will bypass everyone and go from their car to the gate in 15 minutes for international flights” of course anyone can do that who signs up for the government’s TSA PreCheck or Global Entry and checks in online or at a kiosk.
There are over the top amenities, to be sure, like showering in an airplane.
But none of these amenities are funded by making cuts to economy class. (Though there was a conspiracy theory back in 2008 that the water for Emirates showers was made possible by removing paper from the seat backs in coach.)
Airlines are businesses. Why would they choose to lose money on their premium passengers, ‘subsidizing’ those experiences? Elliott doesn’t even offer a theory of business here to explain it.
In fact, he merely asserts it:
Consumer advocates say passengers in the back of the plane are effectively subsidizing these new luxuries by giving up personal space and accepting more restrictive terms on their tickets. In other words, economy class passengers are paying for these amenities without being able to enjoy them.
- He doesn’t offer any mechanism for how or why this happens.
- He doesn’t cite any ‘airline industry experts’
- Instead he offers unattributed “consumer advocates”
More fees in the back, more freebies in the front. The rich get richer. And the rest? Well, they don’t call it “economy” class for nothing.
Elliott’s ‘class warfare in the skies’ seems to miss that even communist North Korea’s Air Koryo and Cuba’s Cubana de Aviación offer business class products.
The biggest irony in the whole column is that the bulk of these perks are available to consumers redeeming their miles for premium cabin travel. And Elliott advises readers not to participate in those programs, to ‘cut up their cards’, calling them scams. The scam, unfortunately, is taking advice from Elliott himself.
Don’t be a hater, Gary. Maybe a major outlet will pick up your own blog one day.
I hate to be judgemental but Chris Elliott columns don’t seem to be about travel. They seem to be about class warfare, anti capitalism and liberal mindset hate. You know its like the tree hugger that is on his/her way to the anti-oil rally/die in but as are getting there by driving a Subaru that burns gas while hauling a kayak made of petroleum products, listening to an ipod and drinking Starbucks. All they while yelling out the window at the person on the highway thats driving a mercedes about how they subsidize the roads for them.
His argument is like saying that the squash player at Michigan is subsidizing their football team. No disrespect intended to the squash player of course. 🙂
@Frank I totally admit in the post — that this column just really got under my skin, and I’m venting.
@DaninMCI I don’t mind anti-capitalism content, and I read and enjoy plenty of authors I’ll disagree with. But some authors write a disproportionate amount of content that’s ill-informed, gets facts wrong.
It is pretty awful what he is saying, especially since many people will buy into it that don’t know any better.
He spent the entire column ranting about the benefits of sitting up front and, at the end, threw in the bit about, “Oh, yeah, the back is getting squeezed, also,” almost as an afterthought. He might as well have said, “I don’t get turn down service at Motel 6, but the people who pay more at the Four Seasons do!”
This column has nothing to do with travel, and everything about class warfare and clickbait.
I think “Not a single one is being subsidized by premium passengers, ” should say economy.
@David thanks
I would have to say which of his articles are worse. If all of his ideas were implemented from his various articles, none of us could travel at reasonable prices.
This has to make anyone’s top 10 lists of just wrong facts.
Mr “Consumer” Elliot is not an angel: last month his email newsletters started showing up in my inbox even though I’d never opted in. His blog’s tiny apology said past subscribers were mistakenly added to his new list but I wasn’t a past subscriber.
His articles are sap headlines that get clicks.
Your point about low-cost carriers is a good one. How does it fit his paradigm when Spirit, WOW, Norwegian, Ryanair, etc offer the WORST experience to the consumer? Shouldn’t they offer the best?
Could you start including the email addresses of his editors whenever you do these Fisking posts? I would love to email them. I can’t imagine any self-respecting editor putting up with this if presented with the facts. And I think we should barrage his editors with emails.
I think some of your premises are actually wrong when it comes to longhaul travel.
“Indeed, it’s this lucrative business that in most cases and for most airlines makes the flight possible. And then they sell excess seats that would otherwise go empty at a deep discount. Since they are going to fly the plane anyway, it is better to get some revenue out of the seat instead of no revenue. Hence the ability to fly cheaply on a major airline.”
So why doesn’t every airline fly an all-premium narrowbody TATL, instead of this being a niche market that no airline flying TATL exclusively practices (mostly limited to NY-LON)? Why is there a history of these airlines going bust regularly, like Silverjet and Eos (next up, La Compagnie)? Why did BA subsidiary OpenSkies go from an all-J config to adding Y seats? Why did SQ give up on their EWR/LAX-SIN all-J config? (Yes, I know, A340-500. They have 787s on order or could use a 772LR, no?)
It would seem to me that economy class has a role in longhaul travel for large airlines, otherwise airlines would just dump it if premium class travel by itself was the only profitable element of an airline.
And we won’t even go into narrowbodies on short-mid haul, where Southwest, AirAsia and Ryanair make it very, very clear that you needn’t have premium class travel to make consistent profits…
“But none of these amenities are funded by making cuts to economy class.”
OK, so why is economy class pitch being reduced over time? Why is 10-across on 777s and 9 across on 787s becoming the new standard for economy? Why are the cuts happening?
I think an argument of “well, we have to make the basic experience of rock bottom fare in coach miserable enough to make people want to pay to get out of it” isn’t completely unreasonable to make when it comes to what’s happened in standard economy over the past 20-30 years. It’s admittedly a slightly less inflammatory argument than going all Occupy Coach Seat like Elliott did. But how else would you explain it?
Also, the basic longhaul business class experience (lie flat seats) definitely HAS improved, by comparison. Oh, while I’m at it… isn’t Delta removing business class seats and adding coach ones in various long haul configurations across their fleet? That would seem to contradict a “well, the empty seats in business class don’t really matter, just like how you only need to sell one million dollar glass of lemonade” argument. (So does the fact that United and other carriers are removing F from their fleets, and that premium economy is booming like gangbusters.)
It seems to me a more subtle argument contradicting Elliott while explaining all this is called for, because on the surface a question of “hey, why is coach getting squeezed when first is getting showers?” isn’t all that ridiculous.
It does sound like more of that business-class-is-morally-wrong, everyone-should-fly-for-15 hours-in-a-non-reclining-economy-seat-eating-trail-mix-and-drinking-water-like-I-do rant you get sometimes (even on flyertalk). Well, fine. When I was 22, physically indestructible and could barely afford economy, I’d have probably said the same thing. But it is incredibly dumb to say that economy customers are subsidizing business and first class flyers when it is clearly the other way around. The retail price of business is usually about 5-6 times the cost of economy on the same international flight, and even if half or more of the front of the plane is discounted corporate deals (at 3-4 times economy) or upgrades, those either were based on miles or status or corporate deals based on volume, and still generating lots of revenue. The fact of the matter is that economy is unbelievably cheap in historic terms, and isn’t subsidizing anybody. The business class flyers are paying their way plus more.
@Gary, If I recall correctly, you’ve been published once or twice. 😉
Passion is the foundation of a great blog. Elliott is one of Gary’s passions. So be it. Call it a symptom of the very passion that makes this blog fun to read.
Elliott has a passion too: Premium Class Warfare. So be it. There are readers who revel in envying the travel experiences of others. Is it really so bad that a writer feeds those readers the falsehoods they yearn to hear?
“Is it really so bad that a writer feeds those readers the falsehoods they yearn to hear?”
Feeding people falsehoods that breed resentment because that’s what they want to hear is one of the foundational bad things about modern media, that is slowly destroying our society. We can only hope other forces push back to equilibrium. So in answer to your question, yes.
@dhammer53 what are you saying?? 😀
I’m just glad he doesn’t let silly things like facts or references get in the way of his opinion…I mean “jourlasim.”
Hansgolden wins the thread with the modern media comment. On the money.
And re: premium cabins shrinking, why not switch to narrow bodies — cargo. Airlines fly widebodies to carry cargo. The self-loading cargo is probably an irrelevant revenue component on a good number of routes.
I think the implication of economy passengers subsidizing premium passengers suggests a financial implication, which I would say is completely false. Natural market forces are pushing airlines to put in increasingly blingy luxury amenities for the premium passenger.
While that benefits the economy passenger by allowing them to fly for cheap, i think the valid point is that in terms of space on the airplane the economy passengers are being crammed in more and more. Whether that is to make more room for more premium seats or just maximizing the already existing economy space is something I don’t know, and probably varies airline to airline.
If airlines are increasing seats per row, adding rows to the same space, or reducing leg space to make additional room for more premium seating, then the premise of economy passengers subsidizing premium passengers in terms of space and comfort on board, then the article isn’t totally outlandish. If 9 economy passengers each get an inch less width and an inch or 2 less pitch so that a single premium passenger can get a shower, or an in-flight bar…then the 9 are indeed subsidizing the 1 premium passenger.
The bigger question is….is that wrong? I guess economy passengers will have their limits to how uncomfortable they will allow themselves to be. Where that is…not sure.
I see two authors presenting different interpretations of the similar facts, but neither author shows enough information to know which interpretation is right.
It is hard to argue with Elliott’s basic premise that premium travel (at least long haul) is getting more comfortable at the same time that economy travel is getting more miserable.
As neither author has shown compelling information, and neither appears to work in revenue management at an airline, it is hard to believe that either of them knows for sure whether anyone is subsidising anyone else or not.
I would call both articles entertaining click bait and am very happy to read them both.
@srptraveller – Elliott’s point in the piece isn’t that travel is getting more comfortable at the top, or at least that’s not what he claims his thesis is, it’s that economy travelers are SUBSIDIZING the comfort of premium travelers. My suggestion is not at ALL that economy travel is getting more comfortable, it is simply that there is no warrant whatsoever for the subsidy claim — which is absurd on its face. My only point is about subsidies.
@Nik we do see airlines switching to smaller aircraft for long haul routes, eg United going 747 -> 777 -> 787 on Australia routes.
Gary, I agree he hasn’t provided any evidence of subsidies.
My comment is that neither of you presented any evidence whether there are or are not subsidies, but both drew conclusions about them anyway.
I think we are left not knowing whether there are any subsidies or not, and the only thing we are really clear on is how much you guys disagree.
I love your blog and don’t comment often. Thanks so much for all your articles and advice.
Chris Elliott’s blog used to be a daily read. I liked his ombudsman-like column, though he never held a candle to either Linda Burbank in USA Today or to the formerly-great Conde Naste Traveler Ombudsman column. Nevertheless, it was something I enjoyed. Those types of columns are rare now a days. If anything, he puts a consumer had a bad-time-story up weekly and has you vote on whether he should help them and then doesn’t update you on what happened. Probably, because he can’t help them anymore because he has no credibility.
But what really made me stop was that I got tired of just what you are saying here. He’s a classic with the “straw man” argument. His statements are, at best, opinions and yet he states them as fact. When confronted with actual facts, he ignores them. His solution to what can be real problems in aviation is a return to government regulation. In my opinion, that would be a disaster and very anti-consumer. Doesn’t anyone remember that it was the Democrats — Ted Kennedy, in particular — who brought us deregulation in the first place because they believed that it would lower prices and increase service. They were right. Deregulation did just that.
Constant articles on how bad premium travelers are, how bad business travelers are, how bad frequent flyer programs are, how bad travel agents are, how bad airlines are, etc., etc., ad nauseum, with government regulation as the solution. No thanks! I get it. He’s a leisure traveler. How he doesn’t understand that the premium travelers, the business travelers, etc., are the ones subsidizing his cheap seat is beyond me. I’m done with him and this rant!
@srptraveller
” it is hard to believe that either of them knows for sure whether anyone is subsidising anyone else or not”
You’re either very right, or very wrong, I’m not sure which. Operating a flight has high fixed costs, and the marginal cost of carrying an extra passenger effectively costs the airline zilch. I won’t get in to RASM and CASM discussions, because they only make sense in the aggregate. A flight with a single business class passenger paying way over CASM and the rest of the plane empty still loses money.
Take away the premium traffic and the flight can’t operate. Take away the economy traffic and the flight can’t operate. Is it possible that both cabins subsidize each other?
All that said, I dislike Elliott primarily because he’s not interested in civil discourse or debate on the matter. These days, he flat out says on his blog that he’s not interested in dissenting opinions. People who comment on his blog and say he misunderstands a few things are met with “this isn’t the platform for that.” I’m talking about things as simple as “I redeemed some miles for an F trip to HKG, the programs aren’t completely useless.”
Dan, I agree.
To know whether there are “subsidies” or not we would need to know in aggregate what percentage of costs are covered by premium revenue versus economy revenue, and how this percentage has changed over time.
I don’t think we can know this using publicly available information.
Fortunately for followers of this blog it doesn’t really matter that much!
As a simple matter of economics and business sense, neither class subsidizes the other. If the airline saw that premium was not paying its way, the airline would add coach seats and remove some premium seats. And vice versa. The airline has all the tools it needs to ensure that both classes earn a similar return.
I think Elliot”s a well-meaning guy who wants to help people. But his obvious anger seems misplaced to me. First class/business class pax aren’t getting freebies. We’re paying for these benefits. They are not free. I just bought a business class ticket to KTM — and it was about triple to quadruple the cost of an economy ticket. So what am I getting for free? I sought out the higher-priced ticket specifically for certain benefits I’m looking for. The airline would not have been able to sell me an economy ticket. They would have lost the whole sale because I wouldn’t have been willing to book a trip that far in economy. In any case, any reasonable middle-class person can buy a business-class ticket if they want it bad enough. It’s a few thousand dollars. This article seems to be coming from a belief that everyone in first/business is rich. That’s just silly. I’ve seen plenty of other obviously middle-class people in those cabins. The passenger, not the airline, made the decision to buy a cheap ticket. How is it bad to have a range of choices?
It seems that you (perhaps willingly) misunderstood Christopher’s article. The article is mainly focused on “first class” only, and not “premium class” in general (which would include “business class” and “first class”). All mentions of business travelers in the article has been in the context of traveling in “first class”, and has nothing to do with business travelers in general. AND Christopher’s stance on first class not being profitable by itself is not a secret and is close to correct.
@MIz
Methinks you’re making a distinction without a difference in this case. Even if Gary confused Chris’s emphasis on F class with premium cabins in general, it doesn’t really change much about Gary’s rant. Chris likes to lodge a class warfare battle, and business class is very much a part of that.
TBH, NO cabin is profitable by itself, it takes the whole plane to make a profit.
Rantin’ and ravin’ , telling baldfaced lies ,insulting half the world or more . Welcome to the internet !
I don’t know who pays for who but , I expect the airlines must benefit from the front seat and the back seat passengers or they wouldn’t keep selling those tickets . Could they sell many flights that were business class only ? Would they still fly if all the coach seats or business seats were empty ? Maybe some of the airlines could give us a reliable answer . I’m certain they run the numbers .
As for Elliott , right or wrong , he’s just a disagreeable person . Not worth your time .
NSX,
If I look back over 20 years of constant TATL travel, economy fares on the routes I fly have gone up much faster than premium fares.
On those same routes premium seats have become fewer and more comfortable. Economy seats haven’t.
I think this just means that airlines finding it easier to improve margins when dealing with individuals than with the corporates who buy most of the premium seats.
I absolutely believe Elliott’s claims premium travellers are getting more for less, and individuals are getting less for more. It just seems so obvious to me.
Given the negotiating power of a corporate buying thousands of seats versus a family buying a handful, I don’t see why it would be any other way.
It’s called capitalism, isn’t it?
@Gary, This is where I say you need sources for your claims. You criticize Elliott for making unsubstantiated claims and yet you do the pretty much the same. I agree with Srptraveller. Please give us facts from reputable independent sources that support your outrage, not bald assertions that you are right and Elliott is nuts.
P.S. Asiana is cutting back on first-class to save money. I don’t think Asiana would do that if it thought first was a cash cow.
@Dan
I don’t think business class is part of the class warfare you believe Chris is trying to lodge. First class is on the extreme end of premium class fares, and that’s exactly that part Chris is talking about.
Some airlines (such as EK or EY) managed to use the halo effect of their first class product to promote their economy and business products. Beyond that, first class, by itself, has not been profitable for airlines in most of the cases. Of course you can analyze the profitability of whole plane, but that does not provide any counterargument against economy and business class products subsidizing first class product. Subsidization may be right there even if the whole plane is (or is not) profitable.
I think distinction between first and business class products makes a difference, first because this distinction is the heart of Chris’s logic, and then not grasping this distinction seems to be the main driver of Gary’s rant.
Chris Elliot is the Rush Limbaugh of air travel. Not worth the sweat.
@john
It’s actually ok to ask someone to cite their sources, particularly if they’re getting published in the national press. Realize that the standards for “columnists” and “journalists” are different, and as a columnist, you’re allowed a bit more leeway in your opinion. I realize this does cut both ways.
Elliott does have a track record of talking about how coach passengers get screwed at the expense and/or to the benefit of the premium passenger. That kind of assertion is an opinion, because you can’t prove it right or wrong.
Several airlines are cutting/have cut first class, because they’re not filling enough seats at prices they want. Airlines that are retaining first class are reducing the cabin size and/or limiting it to certain routes. Just because you’re not getting the premium you want on it, doesn’t mean it’s losing you money. They just feel that they can make more with a different configuration, be it more J or Y+.
@dan, yeah. No matter who is doing the raljing It is all hot air if you can’t back what you say with fact.
@John sources *for what*? That airlines aren’t trying to give a gift to premium passengers and lose money doing it?
@Miz most of the things Elliott refers to are available to business class passengers (although he throws in things that are available to economy passengers, since they sounded premium).
Taking off now so no time to go into details. I’d like to onow what cost data you have that makes you so sure Elliott is totally off base here. Thanks.
@john your questions are VERY VERY broad. But to take an example, the car across the tarmac, Lufthansa books a first class terminal visit inclusive of car at a few hundred dollars per passenger. So when a Delta 360 member spending > $50k a year and on a business class ticket that was $4k – $8k gets a ride I’m pretty sure Delta’s marginal cost doesn’t exceed ticket price for that passenger.
Yes but the Porsche ride cost money. Same for all the other services.
Those costs have to be paid and accounted for somehow.
Do you know HOW they paid for the cost of the Porsche ride.
Was it
A: marginally increase the price of a premium ticket?
B: accept slightly reduced overall operating margin?
C: marginally increase the price of an economy ticket?
or
Z: We don’t know. We can’t know. This information isn’t available to us.
@srptraveller it was (b) in the short term, although in some cases wound up being (a). This was part of a package of things that among US carriers Delta did first, trying to gain more premium business. It cut into the margin on each seat. Bet was it would mean more seats sold. And greater business class loads means less discount business inventory on a given flight. Now it’s actually more complicated than that because Delta then adjusts the number of flights in a market and the number of seats. And they’re not providing the service to everyone, like Lufthansa does from the first class terminal, they’re providing it o a subset of high revenue passengers usually with tight connections although not always because they’ll make use of the cars rather than having them sit idle (since the vehicles themselves have fixed costs, along with the drivers, and the marginal cost of depreciation from driving and gas is low). We definitely know that (c) was not the case.
@Gary , If airlines are cutting back on first class (internationally) clearly it is because they are losing money on that product or they can make a better margin on J or Y. Surely they would not cut back on the product that is carrying the rest of the business. That is speculation on my part just as your assertions are. It would be nice if there was some data that could help resolve the matter.
i really want to thank mr. elliott for spreading his bs that loyalty programs and reward credit cards are scams.
more followers he gains, less competitions for us.
As usual, there is a lot noise and very little signal in this debate. Only eponymous coward’s comment on September 1, 2015 at 7:33 am, comes close to hitting the nail on the head.
Elliot is not entirely wrong. @Gary Leff is mostly wrong. Neither Elliot nor Leff gives their sources for their claims but I will give mine for my claims in a moment.
The truth of the matter is that there is a co-dependence between economy and premium cabin travelers, whereby they “subsidize” each other, but the premium cabin travelers may actual be the ones getting the biggest bang out the co-dependence. It is a case of co-subsidy and for a cleared-eyed look at this phenomenon, I would like to urge everyone to read a piece titled:
“You Paid $400 for Your Flight. The Person Next to You Paid $250. Here’s Why That Makes Sense—and Benefits Everybody” [ http://www.newrepublic.com/article/120406/airline-airfare-price-variability-helps-meet-needs-all-passengers ]
which concluded:
“While it is definitely to the benefit of college students to have business travelers “subsidize” their fares, the business travelers may be getting the bigger benefit—and not just because there are usually a few tickets still available at the last minute (at the highest fare).”
The author of the piece is a serious academic who studies this stuff for real and for a living:
“Amy Cohn is an Associate Professor in the Department of Industrial and Operations Engineering at the University of Michigan, a member of the MIT Global Airline Industry Program…”
G’day! 😉