Australians have a robust appetite for premium economy seats as demand for higher end travel builds, but a major airline is struggling to upgrade its planes fast enough.
Sir Tim Clark, the head of the world’s fourth-largest carrier Emirates, says the demand for premium economy is now so strong that the airline won’t be allowing frequent flyers to upgrade from economy using points, because the company wants to sell tickets in the growing class.
An Emirates Airline flight attendant near the airline’s first Airbus A350-900 aircraft during its unveiling at Dubai International Airport.Credit: Bloomberg
“We’ve got first-hand experience that the premium leisure is now ripping ahead,” he said, as passengers are willing to pay more for wider, more comfortable seats, better food, and entertainment.
Premium economy seats are “so popular”, Emirates is reluctant to make those seats available in exchange for frequent flyer points.
Clark said that after two years of offering premium economy in the market, Emirates has “some really rich data, and it’s not looking good for redemption [of points for premium economy]″.
When the airline does eventually “relent” Emirates would require the number of points “not far short” of what’s expected for business class seats, Clark said.
Emirates Airline president Sir Tim Clark in Melbourne on Friday.
Emirates does publish award charts for redeeming its frequent flyer program. A one-way business class ticket on Emirates from Melbourne to Dubai, required 119,200 Qantas points and about $1250 in taxes and fees in December, according Point Hacks.
About one-third of Emirates 77 weekly flights to and from Australia currently offer premium economy seats, with the number to increase to half of all flights by the end of March, the airline says.
Clark is credited with guiding Emirates from a small player in the mid-1980s into the global behemoth it is today. After decades of expansion servicing long-haul customers Emirates now maintains the largest fleet of the popular Airbus A380s.
Following years of delays in Boeing and Airbus’ production capacity, Emirates is in the process of upgrading 200 planes including its popular 116 strong fleet of A380s.
“That is a strategy which speaks to the uncertainty of what the manufacturers will do for us in the future over the next 10 or 15 years,” he said.
US-based Boeing has been beset by a string of quality control issues, industrial action, regulatory scrutiny and supply change difficulties since the COVID-19 pandemic triggered industry-wide parts shortages. In October, Boeing produced just 14 planes.
Clark spoke in Melbourne where he had attended the Emirates-sponsored Australian Open. He predicts that Emirates’s competition from Qatar Airways will be good for Australians when the Doha-based rival begins 28 weekly services from Sydney, Melbourne, Brisbane and Perth.
“There is nothing wrong with competition” which “is good for the consumer”.
Qatar and Virgin have already begun offering return fares to Europe for less than $2000, ahead of approval of the deal subject to final approval by regulators.
Clark played down suggestions Emirates, which has an extensive code-share agreement with Qantas, had much to lose from Qatar’s plan to acquire 25 per cent of Virgin.
“Since we came to the market and done what we’ve done, and then Etihad and Qatar Airways after that ... the market has grown with us.”
The move by regulators to open the market has increased travel capacity for Australians.
Australian airlines held 32.8 per cent of the Australian international passenger market, with Qantas (and Jetstar) accounting for 26.1 per cent, according the Aviation White Paper, released in August. Virgin Australia had 6.7 per cent.
In the current environment there is no shortage of demand for the kind of long-haul flights Emirates and Qatar offer, Clark said, noting however that final approval had not been granted by the Australian Competition and Consumer Commission (ACCC).
He said, “there’s a little bit of risk” in pre-sold tickets if the deal is not given final approval, which will make “life difficult” for those people who have booked.
When the ACCC granted interim authorisation of the Virgin-Qatar deal last year, it said that if final approval was not given, customers who had booked the proposed services would be protected including through refunds or re-accommodation on a suitable alternative flight at no additional charge.
Even as domestic fare growth has “moderated”, according to investment bank UBS this month, demand for international flight in Australia is “strong with fares sustaining positive year-on-year growth”.
The pent-up demand for travel can be seen in Emirates’ ticket sales, Clark said, flattening what had once been seasonal peaks and troughs.
“We’ve seen an in-fill of the troughs,” Clark said. “So there has been movement outside the traditional periods.”
Last November, for example, was the “most robust” for ticket sales in Emirates history, he said.
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clarification
This story was amended to explain that customers who book tickets on new services being offered by Virgin and Qatar Airways will be protected if the Virgin-Qatar deal does not receive final regulatory approval.