Tuesday, July 04, 2023

India's airlines will try to counter Emirates' launch of Premium Economy to Mumbai, Bengaluru

Dubai: Will India’s airlines go the ‘Premium Economy’ route to pick up higher revenues and profit margins on their services to the UAE?

Airline industry sources say doing so would be the best option for India’s carriers on this high-frequency, high-demand route – and more so after Emirates announced it will do so from October in their flights to two Indian cities, Mumbai and Bengaluru.

"By targeting price-sensitive business passengers and comfort-seeking VFR (visiting friends and relatives) and leisure travelers, the Premium Economy has become a value-added product for airlines,” said Linus Bauer, founder and Managing Director at Dubai-based Bauer Aviation Advisory. ((It represents) a significant revenue stream and strategic mechanism to improve yields – especially on long-haul services."

Research by his firms shows that a Premium Economy seat's production and implementation cost is 1.6 times higher than that of an economy seat. "Yet on long-haul flights, it generates 2.3 times higher revenues than its production cost, giving it the highest marginal returns across all cabin classes," said Bauer.

But would adding a Premium Economy generate a similar sort of response on the relatively short-haul flights between UAE and India? And more so given that ticket rates on the sector consistently fly high?

"Bengaluru is an IT hub and Mumbai attracts a lot of corporate travelers,” said Husain Iqbal, General Manager – GSA at Sharaf Travel. “The product would experience some popularity even among point-to-point passengers."

As for Emirates, the Premium Economy rollout gives it significant advantages in tapping traffic from India on longer-haul flights transiting through Dubai. 

Whether low-cost carriers would consider offering a Premium Economy service will likely depend on a careful analysis of market demand, operational feasibility, and potential profitability.

Among Indian carriers, Vistara and Air India offer Premium Economy services on select long-haul flights. Iqbal said that once Vistara’s merger with Air India completes next year, there is no telling what will happen to its existing services. Air India announced a Premium Economy product (in March this year), albeit limited to India-US routes.

04/07/2023 Dhanusha Gokulan/Gulf News

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