As Delta Air Lines upgrades its fleet with more efficient planes to reduce costs, executives anticipate another benefit from the new jets that will help generate revenue: more premium seating.
So-called "branded" fares generated an additional $200 million during the final three months of 2017. Paid upgrades to first-class or "Comfort Plus" seating grew more than 25%, President Glen Hauenstein told investors and reporters during an earnings call Thursday.
Comfort Plus is Delta's extra-legroom seats that offer a few extra inches of space for coach-class fliers.
This year, the airline anticipates a $350 million increase in branded fares, in part because newer planes will expand premium seating 5%, Hauenstein said.
“We think that’s going to be key to our ability to drive revenues going forward,” Hauenstein said.
Part of Delta’s strategy is to sell premium seats to business travelers more easily, even if their companies won’t pay for the higher cost.
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The airline reported $80 million in additional income during the six months last year that passengers were allowed to upgrade seats after they purchased a ticket, Hauenstein said. By this summer, the airline will offer post-purchase upgrades for miles, too, he said.
Eventually, the airline hopes to market post-purchase upgrades digitally, he said.
Delta anticipates taking delivery of 60 new planes this year, which will cut fuel costs an estimated $100 million in 2018, according to Paul Jacobson, chief financial officer.
The Airbus A350, with the Delta One suite and Delta Premium Select, will be introduced to additional destinations by the end of March, Hauenstein said. The carrier's first A350 flight came in fall 2017 when Delta deployed the plane on its Detroit-Tokyo Narita route. Detroit-Seoul followed, and the airline expects them to also begin flying on certain routes to or from Atlanta, Beijing and Amsterdam by spring.
Delta's new business-class suites and the Premium Select — an international-style premium economy seat — made their debut on the A350s.
The newer planes will offer a combined 5% increase in premium seating, which Hauenstein said is the cornerstone of the carrier’s ability to drive premium revenues.
“Not only do we have the base, but we now have the premium products and services and different ways to buy them at different points in the purchase path,” Hauenstein said. “Those are things that we have coming in the pipeline in the next months and years that we’re really excited about — not driving to the bottom end of the commodity, once-a-year flier, but to really the people who are discerning and who want to buy premium products and services.”
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