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Airlines rely more on business travelers to recover higher fuel costs.
Fliers has not reduced its air travel this year, even though ticket prices have increased, helping airlines offset an annual 40% increase in gas prices.
This includes the growing demand for premium seats.
United Continental Holdings
Inc.
UAL 5.95%
said this week that the international premium unit business unit grew faster than the economy class last quarter.
Upgrading passengers to "economy plus" seats offering a little more legroom has allowed for a 10% increase in out-of-the-box business, United said.
"We continue to see very strong demand," US President Scott Kirby told analysts and investors at a conference call on Wednesday. "It's one of the best income environments we've ever seen."
Delta Airlines
Inc.
DAL 2.24%
said last week that revenue from the premium business booth and premium products had increased 19 percent in the third quarter, while revenue from the main booth had risen 3 percent.
The $ 592 million increase in business revenues and discounted tickets accounted for approximately two-thirds of Delta's overall sales increase for the quarter.
According to Delta, more and more customers are opening their portfolios for high-end seats rather than hoping for free upgrades. The carrier now sells about 60 percent of the first-class cabins, up 13 percent at one point, senior executives said last week.
United's shares traded close to 6% higher on Wednesday afternoon. Delta shares were trading up 2.3%.
Both companies claimed to have offset most of the fuel price increase by generating more revenue and controlling costs.
United said it offset almost all of the additional $ 763 million purchased in the third quarter. Delta said that it accounted for about 85% of additional fuel costs.
"Our quick recovery of these costs has never been better," Delta CEO Ed Bastian told a conference call last week.
Airlines also believe they have the opportunity to further increase their prices.
"We have a very long way to go" before rising prices discourage travelers, Kirby said.
According to United, rising prices for short-term bookings – including many business travelers – contributed to the 6.7% rise in its domestic business figure in passenger units.
Airlines have been more successful in competing with low-cost airlines on one side while charging extra business travelers for each other, said Joseph DeNardi, an analyst at Stifel.
"They do not give business customers a rate corresponding to Spirit," he said.
Carriers also hope that larger and more comfortable seats will encourage high-end travelers to pay more. As Delta abandons its aging fleet of MD-80s and replaces them with Airbus A321s, the carrier will add 20% more premium seats, Delta Chairman Glen Hauenstein announced on Oct. 11 with analysts and analysts. journalists.
United is redeveloping its planes with extended seats for its Polaris international business class.
"I can not wait to have Polaris business class seats on each of our big planes," United sales manager Andrew Nocella said Wednesday in his call for analysts and journalists. "He can not come soon enough."
Write to Alison Sider at [email protected] and Andrew Tangel at [email protected]
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