Airlines selling more premium seats

Demand for seats in the front of the aeroplane - the industry's most important market - has recovered from the depths of the recession but will remain weak for months to come, an industry trade group said yesterday. The number of passengers in first or business class fell 12 per cent in August compared with a year earlier, the International Air Transport Association (IATA) reported. The premium travel market hit its nadir in May, when passenger numbers were down 23.5 per cent compared with a year earlier.

Total revenues from premium travel were still down by 30 per cent in August, the latest month for which data was available, IATA said. Premium seats represent less than 10 per cent on a typical aircraft, but make up 30 per cent of ticket revenues. Gulf airlines, including Etihad Airways and Emirates Airline, have built their popularity in large part on the luxury of their premium seats. "The recovery of this market segment is key for a return to profitability for most network airlines," IATA said. "Given the volatile month-to-month past pattern in premium travel and the relatively weak upturn in world trade, some fall-back in premium travel in September would not be unexpected."

Average fares for premium seats were down 18 per cent from a year earlier, and IATA said the recovery in passenger numbers did not necessarily indicate a recovery in revenues from the premium market. "Some of the rise in premium travel could be upgrades with little benefit to yields," IATA said. In the Middle East, premium travel to Europe and East Asia was down almost 10 per cent in August, IATA said, with some of the decrease attributed to the start of the holy month of Ramadan.

The level of exposure to the premium market will be a key factor in the current weak market, the chief executive of Qatar Airways said this week. Qatar will keep expanding with new Airbus A340 aircraft that have fewer business-class seats than its competitors, Akbar al Baker told Bloomberg. "Business-class travel is still buoyant with us because we don't have the same exposure that other airlines have," he said. "It's not difficult to fill this when you have a reasonable number and you give a first-class service."

Mr al Baker said Qatar would lure passengers who normally travelled in business to its coach service, which was "as good as premium economy of any other airline". @Email:[e-mail] * with Bloomberg