Article: First class cabin is going away within five years.

[Donny_Wingo]

Interesting article on AirAsia. What do you think?

http://www.businessinsider.com/tony-fernandes-air-asia-ceo-interview-e-commerce-branson-2017-11

Even though AirAsia is thriving, the airline won't be expanding beyond its bread and butter low-cost economy model. When asked if AirAsia is looking to offer a low-cost, long-haul business-class-only product like La Compagnie, Fernandes quickly shot down the idea.

"No, not while I'm at AirAsia," he told us. "I think focus is key and we're good at what we do and [long-haul business-class-only] is a different model."

With that said, Fernandes understands the reasoning behind a dedicated business-class airline and is baffled by why airlines would offer so many different cabins on board a single aircraft.

"Airlines were crazy to have first class, business class, premium economy, and economy on one friggin plane," Fernandes said. "That's four business models on one plane."

"You don't have Four Seasons hotels with budget rooms and super suites, they basically have one standard, but with bigger rooms," he added.

Instead, the AirAsia boss believes market segmentation in the future will see airlines specialize in one or two particular products.

"I've always said airlines will eventually become low-cost carriers and business class," he proclaimed.

According to Fernandes, we will see the end of the first class cabin within the next five years. In addition, the economy cabin on full-service airlines could disappear altogether with dedicated low-cost carriers taking over that segment of the market. This means traditional, full-service airlines could be left operating flights with only business and premium-economy cabins.

[orangeair]

That may be where the industry is going over the long term, but not within 5 years. No way airlines are going to abandon economy class entirely....at least not until Boeing or Airbus comes up with an aircraft the size of e.g. an A321 capable of doing 14+ hour longhauls. There's a reason the likes of EOS (business only) failed miserably....economy might not be profitable but it costs airlines next to nothing marginally to carry the passengers, assuming they aren't upgauging aircraft just to carry them. Shrinking economy cabins - yeah, plausibly. Legacies doing away with them - absolutely not. First is going away though, probably because business class is "good enough" these days (flatbeds and closed-door suites in some cases)

[KernAir]

I can understand the argument. An airline that focuses purely on economy passengers will be better suited to their needs than an airline that focuses on a little bit of everything.

That said, I don't think "economy" or "first class" will disappear for certain airlines. The definitions and offerings will change but the basics will remain the same. In fact we've already seen that happen with 'Business' making way for 'Premium Economy' (which is effectively the Business of old) and so forth.

[Popodum]

Not sure economy class only could generate enough profit to sustain and develop a company.
Ryannair for instance currently struggles with ticket fares (low to start booking, and quite high when threshold is reached). Besides the company also have some trouble with staff, underpaid and overused.
Having an adaptable/flexible business/first could balance revenues positively.
I guess aircraft size is today more a problem for airlines, A380 vs B787.
Although Emirates will certainly complete their A380 order to Airbus, they decided to go for the 787-10 (April next year).

[Donny_Wingo]

This is what caught my eye and made me think about it...

"You don't have Four Seasons hotels with budget rooms and super suites, they basically have one standard, but with bigger rooms," he added.

Instead, the AirAsia boss believes market segmentation in the future will see airlines specialize in one or two particular products.

If you look at Hilton Hotels, they have 14 different hotel brands for each segment of the market. It isn't one hotel with 14 different products.

Are airlines trying to do too much with one plane?

[orangeair]

I think what Fernandes is neglecting is the fact that there just aren't enough business/premium economy passengers out there to fill an entire plane. Plus these passengers pay A LOT of money to travel, and want flexibility, which means reducing frequencies isn't an option. Unless there's a 757-sized plane that can reliably fly e.g. NYC-HKG or equivalent distances, airlines without economy class will probably be a very small niche.

First class, though, is pretty much irrelevant these days and airlines would probably be better off without it.

[KernAir]

Not sure economy class only could generate enough profit to sustain and develop a company.
Ryannair for instance currently struggles with ticket fares (low to start booking, and quite high when threshold is reached). Besides the company also have some trouble with staff, underpaid and overused.
Having an adaptable/flexible business/first could balance revenues positively.
I guess aircraft size is today more a problem for airlines, A380 vs B787.
Although Emirates will certainly complete their A380 order to Airbus, they decided to go for the 787-10 (April next year).

Ryanair is currently hitting profit margins after tax of 10%, while successful airlines are typically in the 1-3% bracket. I would use a lot of words to describe Ryanair, but "struggling" isn't one of them.

[Popodum]

Not sure economy class only could generate enough profit to sustain and develop a company.
Ryannair for instance currently struggles with ticket fares (low to start booking, and quite high when threshold is reached). Besides the company also have some trouble with staff, underpaid and overused.
Having an adaptable/flexible business/first could balance revenues positively.
I guess aircraft size is today more a problem for airlines, A380 vs B787.
Although Emirates will certainly complete their A380 order to Airbus, they decided to go for the 787-10 (April next year).

Ryanair is currently hitting profit margins after tax of 10%, while successful airlines are typically in the 1-3% bracket. I would use a lot of words to describe Ryanair, but "struggling" isn't one of them.

You're right. Profits remain high and low fares will still answer today customers' demand.
I was more thinking about struggling with personnel, as O'Leary always looks for more term profits.
He puts pressure on staff to reduce overall cost.
Don't forget he tried to set a sit-stand concept with Boeing and Airbus to increase the seats. Fortunately EASA and FAA responded negatively.
Well, we'll see if his strategy is right.

[KernAir]

You're right. Profits remain high and low fares will still answer today customers' demand.
I was more thinking about struggling with personnel, as O'Leary always looks for more term profits.
He puts pressure on staff to reduce overall cost.
Don't forget he tried to set a sit-stand concept with Boeing and Airbus to increase the seats. Fortunately EASA and FAA responded negatively.
Well, we'll see if his strategy is right.

Much of their staffing issues have to do with the fact that they operate a massive B737 fleet in a market where the A320 is far more popular. Pilots that do have the certifications use Ryanair as a stepping stone in their careers so they have difficulty maintaining the number of pilots required. They'd probably have a much easier time with staffing if they switched to Airbus aircraft.

The sit-stand wasn't a serious proposal. O'Leary knows that the media will report on any silly ideas so he just says these things for free marketing.

It does look like low-cost is here to stay. The question is will it kill economy with more business-oriented carriers.

[cannon5]

I can understand the argument. An airline that focuses purely on economy passengers will be better suited to their needs than an airline that focuses on a little bit of everything.

That said, I don't think "economy" or "first class" will disappear for certain airlines. The definitions and offerings will change but the basics will remain the same. In fact we've already seen that happen with 'Business' making way for 'Premium Economy' (which is effectively the Business of old) and so forth.

Agree with your opinion