The Premium Problem

Despite cabin retrofits being hit hard last year due to airline cutbacks, spend on interior equipment and furnishings will still account for the largest share of the segment at 41%. The PTF market, which has seen several passenger aircraft become freighters, will account for 9% of Europe's modifications segment, according to Aviation Week data.

Like most areas of the aftermarket, cabin retrofits were hit hard in 2020 as airlines cut back on non-essential spending and investment.

As mass vaccination programs lumber into motion, interiors specialists may believe the worst is over, but big questions remain over airlines’ willingness to invest in passenger experience over the next few years – and over the type of interior they will choose.

A key issue is when, if ever, premium traffic and corporate travel will return to the levels of 2019, when premium cabins accounted for about 5% of global passenger but 30% of revenues.

Chief executives of airlines such as Emirates and Lufthansa claim there is massive pent-up demand for business travel, but there are several reasons to doubt this.

First, video conferencing, while imperfect, has proved to be a revelation for many businesses. Second, even managers that yearn to travel again may have their travel budgets constrained for several years due to the ravages of the pandemic, after which time video call use may have become entranched. Third, the growing importance of sustainability will push some businesses to cut back on air travel.

This could become a major issue for cabin specialists if demand for premium retrofits collapses, but it poses more profound questions for the wider aviation industry and the business model of many of the world’s most famous airlines.

IATA data for 2019 shows that premium traffic accounted for more than half the revenues on transatlantic flights, almost half on Europe-Middle East routes, and around 40% on flights over the North and Mid-Pacific and between European and Asia.

If a significant chunk of that disappears, airlines may have to raise economy fares to compensate, or possibly push even more strongly into premium economy services.

However, there may be limited scope for a long-haul market reliant on leisure travellers. Two of the biggest names in long-haul, low-cost flying – AirAsia X and Norwegian – are both out of the game, with the former undergoing a period of ‘hibernation’ as it seeks to restructure, and Norwegian announcing today it would quit the long-haul market for good.

Alex Derber

Alex Derber is a UK-based aviation journalist and editor of the Engine Yearbook. He contributes regular features, news and opinion pieces about the…