SIA vows not to cannibalize other products for premium economy


As Singapore Airlines prepares to launch its new premium economy product in the second half of 2015 on Airbus A380s and Boeing 777-300ERs, the airline is vowing that the introduction of this new cabin will not come at the expense of economy class service or business class seats.

“It’s not about removing offerings in the economy class to make the premium economy different,” CEO Goh Choon Pong told RGN at the recent Star Alliance meeting in New Delhi.

With SIA’s economy class offering hot towels, cocktails and multi-page color menus to passengers, the question has arisen about how SIA will sufficiently differentiate premium economy from what is an already excellent economy class experience. “It’s not so much about taking something away to make another thing look better but more how do you improve certain things to differentiate more,” Goh says.

A bigger overhanging question for some has been if premium economy – which will offer both wider seats and better legroom than coach – will cannibalize SIA’s business class. Goh expects premium economy to attract two types of passengers – first are existing economy passengers willing to pay extra for more service but not business class; and second, “We expect there are some people who are anyway traveling on premium economy of other carriers to come on us.”

Australia and Europe are SIA’s key long-haul markets and there is a plentiful selection of airlines with premium economy, from old staples like British Airways to newcomers like Lufthansa. Qantas has offered premium economy on its A380s flying between Australia and Europe, a key segment for SIA. Closer to home, Cathay Pacific had a large premium economy launch.

SIA expects business class cannibalization will be limited since it intends to remove economy, not business, seats to make way for premium economy.

“The expectation is not to remove business class,” Goh says. “But it is too simplistic to say that because as part of the retrofit we also hope to optimize the way seats are configured on the aircraft. The approach is more holistic than simply taking out economy seats and putting in premium economy. So we [will] optimize the space utilization better.”

Lufthansa and Cathay launched premium economy by typically replacing economy seats, not business (see tables below).

Various estimates project that about half of SIA’s traffic is connecting. An A380 or 777-300ER premium economy passenger could connect to another aircraft in SIA’s fleet without premium economy. But Goh is not worried about such connections “at the moment”, hinting there could be a later premium economy rollout to other aircraft types.

“We have to progressively launch things,” he says, noting that SIA’s business class retrofit programme for 19 777-300ERs will cost US$325 million. “It’s quite a lot of money.”

Cathay chart

Lufthansa chart