Come fly first class with me

One of the bold predictions made in the dark days of the first Covid-19 lockdown was that air travel would never be the same again. Once executives discovered it was perfectly possible to hold meetings with counterparts across the globe via Zoom, business travel — from which many airlines derived the bulk of their income — would surely never fully recover; companies would balk at paying for pricey air tickets and hotels. As travel collapsed, many airlines were kept alive by bailouts. Hundreds of aircraft were parked in the Arizona desert.

Things have turned out rather differently. Monthly air passenger numbers are virtually back to pre-pandemic levels. But demand is recovering fastest in the premium segment — driven not by business travellers but by leisure. Lufthansa chief Carsten Spohr said this week that his team’s urgings to expand first class — long in decline — were something he “never thought I would hear”. Air France-KLM says high-end leisure travellers are more than offsetting reduced corporate travel. The three biggest US carriers told investors last month passengers were eager to book seats at the front of the plane.

The recovery is not only in first and business class. Low-cost Ryanair this week struck a deal to buy up to 300 Boeing aircraft. With demand close to outstripping supply amid a backlog of new planes, and labour and fuel costs soaring, air fares are rising at twice the rate of inflation. The struggle by airlines and airports to accommodate the surge led over the past year to delays, cancellations, and falling customer satisfaction levels. But that, in turn, may be pushing middle-class customers to upgrade their seats in search of a better experience — even, in some cases, at the cost of shortening their trips.

One factor driving the wanderlust is “revenge travel” — the urge to make up for foregone trips, funded by savings accumulated during lockdown. Then there is “bleisure”, the growing tendency for those who are still travelling on business to tack leisure time on the end, and take partners with them.

The wealthy seem particularly seized by the post-Covid “you only live once” or “yolo” mentality: a readiness to splash money on goods and experiences today, not hoard it for an uncertain tomorrow. The same phenomenon is reflected in the surge in luxury cars, watches and handbags. France’s LVMH recently became Europe’s first $500bn company, its founder Bernard Arnault overtaking Elon Musk and Jeff Bezos as the world’s richest person. Indeed, the super-rich never really gave up travelling in the pandemic, driving a boom in the private jet industry.

Some airlines now foresee a permanent shift towards holidaymakers filling first and business class cabins. When those berths sell for many multiples of economy prices it is understandable for the likes of Lufthansa, Qantas and Etihad to be rushing to expand premium cabins with options including extra-wide beds and UHD televisions.

Yet this seems an uncertain long-term bet. The US luxury boom is slowing, and the urge for “revenge travel” may wane along with Covid-era savings. Climate concerns may once again start to intrude. And some in the industry concede that, after 40 years of falling fares, no one quite knows what today’s rising ticket prices may mean for future demand, or where the ceiling is.

The history of the air travel business is that when demand booms, supply eventually catches up — and returns are pummelled. Delays in delivering new planes are slowing that cycle today, but future order books are bulging. Lufthansa’s Spohr quipped in March that current high yields were “just too much fun”. After their near-death experience during Covid, airlines may need to enjoy them while they last.