American, looking to increase its profitability, said the first retrofitted aircraft will begin commercial service this month from New York to Buenos Aires. American expects to complete upgrades of all 20 of its 777-300ERs sometime in 2027.
The revamped aircraft will have 144 premium seats, up from 116 under the current layout, with the total percentage rising to about 44% from 38%.
The new arrangement also includes 70 Flagship Suite business-class seats with privacy doors, along with 44 Premium Economy seats and 30 Main Cabin Extra seats, American’s extra-legroom economy product.
While the American’s current 777-300ER aircraft has 52 business-class seats and eight “Flagship First” seats to constitute the carrier’s top-tier international first-class cabin, the airline will be eliminating those seats as part of the retrofit, with the product no longer sold on 777-300ER flights for travel beginning November 19.
The retrofitting will also increase the aircraft’s capacity to 330 passengers from 304. The number of standard economy seats, on the other hand, will edge down to 186 from 188.
American will be the last among the “Big Three US Carriers” to retire its first-class offerings. Delta Air Lines, in 1998, combined its international first- and business-class cabins, while United Airlines stopped selling international first class in 2018 as it transitioned its long-haul fleet to Polaris business class.
American’s retrofitted 777-300ERs, while serving long-haul markets including London, Tokyo, Sao Paulo, Buenos Aires and Sydney, will also offer upgraded in-flight entertainment, while members of American’s AAdvantage loyalty programme will get access to free high-speed Wi-Fi.
American was forced to take the call in 2022 as international customers were not buying the product, with business-class seats becoming their new favourite. Delta and United have already taken a lead over American when it comes to cashing upon premium travel.
Premium travellers generated nearly half of American’s ticketed revenue in Q2 while accounting for about 30% of its seats. Learning from that, the carrier is now looking to apply the same formula to its domestic flights too, by increasing the seats to about 40% in the coming years, up from roughly 25% now.
In the American aviation circle, revenue from higher-end products has been growing faster than from more price-sensitive offerings at some of the largest airlines, reflecting a widening divide as wealthier customers keep spending while budget-conscious travellers pull back.
And the Big Three are not alone in making changes as per the new industry trend.
Budget carrier Southwest Airlines has unveiled plans to open its first-ever airport lounges to attract higher-spending premium travellers and diversify revenue streams.
The airline is looking to shed the tag of being a low-cost one, apart from boosting ancillary revenue through assigned seating, extra-legroom seats and other product enhancements.
JPMorgan Chase will partner with Southwest to open the airline’s airport lounges.
Globally, while flyers prefer airport lounges as quieter places to work or relax, apart from enjoying complimentary food and drinks and a more seamless airport experience, airlines are equally seeing the arrangement as a winning formula to lock in customers, support premium fares and drive spending on lucrative co-branded credit cards.
Talking about co-branded credit cards, Southwest will roll out a similar product in 2027 that will be issued by Chase to provide customers access to its airport lounge network.
Initially, Southwest will open four lounges in Austin, Baltimore, Honolulu, and Nashville, with more to follow.
American aviation’s premium push comes amid the airlines globally feeling the pinch of a sharp rise in fuel prices stemming from the Iran war, squeezing their already thin margins.
Carriers with a stronger suite of premium offerings, as per the analysts, are better positioned to weather the pressure, as they can lure travellers willing to pay more for higher-margin services such as premium seating, lounge access and other upgrades.
Southwest, under the pressure of activist investor Elliott Investment Management, has been overhauling its business to better compete with the network carriers, following post-COVID weaker profit margins.
CEO Bob Jordan, three months ago, signalled that the carrier could add more cabin options, including “true first class,” apart from venturing into long-haul international flying.
Among other budget carriers, Frontier is adding first-class-style seats, while JetBlue is expanding its premium offering with airport lounges.