The Wall St. Journal Update on Imperial Class

They don’t call it that, of course, but check out Etihad’s new “Residence” at the front of their A380s:

  • $20,000 one-way London to Abu Dhabi
  • Includes ensuite toilet and shower facilities, with unlimited water
  • Savoy-trained butler, dedicated to your suite, who will contact you before the flight to discuss your particular needs
  • Half of the flights in January are already sold out

As the Journal’s Scott McCartney notes (paywall), they aren’t competing against other airlines’ first class offerings but against private jets, which I speculated would be one of the defining characteristics of Imperial Class (see other posts below):

Airlines around the world are one-upping each other on first-class perks to attract big spenders and lure people away from private jets, which may cost $100,000 to get to New York from the Middle East and require a fuel stop.

To be fair, though, a Gulfstream G650 can carry up to 18 passengers (you get 2 for Etihad’s $20,000) and, according to Gulfstream’s web site, can easily fly from New York to Abu Dhabi.  If it’s just the two of you, though, …

McCartney also describes the super-lux offerings from competitors Emirates and Singapore, which, to be honest, seem a little pedestrian. We can assume that they will soon try to exceed Etihad with more, and more luxurious, suites. Meanwhile, some of these same airlines want to squeeze (literally) another seat into each row of coach, making 11 across on their A380s. So far, US carriers have lingered somewhere in the middle, with more premium offerings than the budget airlines, but topping out with narrow beds tucked into cubbyholes. It’s worth pointing out that stuck in the middle makes one vulnerable to both ends, strategy-wise.

Consider profit as a function of the fraction of the cabin floor available to coach. Let s denote that fraction and let P[s] (read “P-sub-s”) denote the profit achieved for any value of s, noting that each airline has its own P function at any given time. To make things simple, we’ll imagine P as some composite for the three legacy majors, Delta, United and American (in my press release of May 27, 2013 — first link below — I imagined that in the near future, these three will merge). Thus an all-economy airline would have s=1 and an all-business-class airline would have s=0. There is a non-zero threshold T such that once s degrades to this threshold, it will collapse to zero. That is, P(s) for values of s less than T will be noticeably less than for P[0] so airlines in this region will set s to 0 (eliminate coach) and adjust their overhead accordingly.

In other words, as the economy continues to wring out the bottom 90%, they won’t be flying very much. The upper 10% will be able to fly, but they will want, and be willing to pay for, something better than the 30 inches of pitch (distance between front of my seat and the front of yours) and 17 inches of width in many of today’s coach rows. For the top .5%, cost is no object — in fact, being seen as able to pay $20,000 for an 8-hour plane ride may be the object in itself — so airlines will grow the nascent market segment represented by “The Residence.” Hence, Imperial Class. As time marches along, coach will become more expensive and continue to shrink until most of today’s airlines won’t see it as worth the trouble.

Other posts on Imperial Class:

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One thought on “The Wall St. Journal Update on Imperial Class

  1. Good posting, good information.

    Now consider this;

    The USA’s political class looks as if they’re poised to offer the choice of
    either a Bush, or Clinton in the next general election.

    Doing the math,
    a Bush was in charge, arguably in the last couple of years of the Regan
    administration. GHB effectively had a 6 year tenure.

    GWB had 8 utterly catastrophic years, that included 9-11, the 2008 melt down,
    and the torture debacle.

    Clinton was in charge for 8 years.
    I can recall having a lot of money in my pocket and bank account
    in those days. With 1998 likely to be the last really good year
    we’ll ever see in our lifetimes.

    An 8 year interlude with Obama. Some would say ineffectual, though he might
    be remembered for this latest action with Cuba.

    Doing the math; Clintons and Bushs have monopolized
    governance for 20 years combined and maybe poised for another 4 to 8.

    If you like the way the country, and the world is NOW, you’re going
    to LOVE the next several years.

    An irony that strikes me, is how much we profess to hate North Korea’s
    Oligarchic family dominated Plutocracy.

    Yet here we are, you have to give Orwell credit, the man was truely
    gifted, and only off the mark by a decade or so,,


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