Champagne in Coach Class as Singapore Airlines Plays Catch-Up

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Premium Economy Seats
Singapore Airlines Ltd.'s premium economy seats. Source: Singapore Airlines Ltd. via Bloomberg

Want something more than the plain-vanilla coach-class airline seat?

Singapore Airlines Ltd. is selling a new premium economy version: Pay a fair bit more than standard economy and you’ll get champagne, a broad selection of wines and food, a bigger TV and seats that are as much as 1 1/2 inches wider.

Usually considered a trend setter in the industry -- in 2007 it became the first airline to put a double bed, mattress and duvet on a commercial plane -- Singapore Air now is playing catch up. New seats and other offerings are key for the airline to stay ahead of regional competitors like Cathay Pacific Airways Ltd. and Qantas Airways Ltd. At the high end, Middle East carriers are offering business travelers showers and butlers, while at the lower end budget carriers are luring passengers with cut-rate fares.

“Historically, Singapore Airlines has found a way to make it work whatever they put in place,” said Mohshin Aziz, an analyst at Malayan Banking Bhd. in Kuala Lumpur, who rates the carrier’s shares a hold. Premium economy “provides greater margins and better profitability for the airline, so it will have a positive impact on the bottom line.”

Singapore Air on Thursday reported net income in the year ended March 31 rose 2.3 percent to S$367.9 million ($279 million), lagging behind the S$418 million average profit estimate in a survey of 17 analyst estimates compiled by Bloomberg.

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The airline is retrofitting 19 Airbus Group NV A380s and 19 Boeing Co. 777-300ERs to include several dozen premium economy seats. The airline also will put the wider seats on 20 A350 planes it will receive starting in early 2016. The new service will debut Aug. 9 on a flight to Sydney.

The upgrades “will add costs” to the company in the year ending March 2016, Singapore Air said in a stock exchange statement Thursday. The investments are expected to improve future performance, the carrier said.

By early next year the premium economy service will be available on flights to Beijing, London, Tokyo, New Delhi, Frankfurt and New York, among other destinations.

The airline is already refurbishing its business class seats, offering “Sundeck” and “Lazy Z” seating for premium-class travelers.

“Singapore Air stepping in with a premium economy product is perfect timing,” said Mark D. Martin, chief executive officer of Martin Consulting, an aviation consulting firm. “This will work extremely well with one of Asia’s largest communities, the blue-collar and white-collar travelers who are willing to pay a bit more for service.”

Singapore Girl

Singapore Air has a history of standing up for economy class passengers. Famous for its “Singapore Girl” advertising campaigns, the carrier was the first to offer economy passengers free alcohol in the 1970s, going against the International Air Transport Association’s regulations at the time.

In October 2007, the airline became the first to fly the Airbus A380 superjumbos commercially.

Now the tables have turned, as competitors were quicker to upgrade their economy-class offerings. Sydney-based Qantas introduced a premium-economy offering in 2008, and Hong Kong-based Cathay Pacific followed suit four years later.

“Cathay Pacific tried it and claimed it was hugely successful and very popular, and that basically has forced Singapore Airlines to react,” Malayan Banking’s Mohshin said.

A premium economy ticket on the inaugural Sydney flight starts from S$1,890.40, S$350 more than the most expensive standard economy seat, according to the airline’s website. Eventually the airline may be able to charge 50 percent to 100 percent more for premium economy than for standard economy, Mohshin said.

Introducing premium economy class could help Singapore Air cut about 1.5 percent of its capacity by January 2016, according to CAPA Centre for Aviation, an independent consultant. Much of the expected jump in next year’s earnings will come from lower fuel costs.

“In theory, economy-class load factors and yields should also improve as Singapore Airlines sells fewer seats at the lowest fare buckets,” CAPA said in a February report.

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