The Economics of Airline Class

The Economics of Airline Class


This is a Wendover Productions Video made
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This video is a bit of a continuation to my last one–Why Planes Don’t Fly Faster. I
ended up talking a lot about the Concorde–the supersonic plane–but part of the story was
left untold. Even though the Concorde failed, even though it wasn’t commercially viable,
it still had a profound effect on how we fly today. Let me explain…
Economy class is not how airlines make money. The real money, at least for the traditional
airlines, is in premium cabins. Let’s take, for example, this British Airways 777. There
are 224 total seats on this plane and it flies daily between London Heathrow and Washington
Dulles airport. A roundtrip economy class ticket leaving March 15th and returning on
March 22nd costs, at the time of writing, $876. That means that, if each one of the
122 economy class seats is filled, the entire back section of the plane will make the airline,
round-trip, $106,872. Meanwhile, the going rate for one of their premium-economy seats
is $2,633 round-trip meaning the entire cabin will make $105,320. Already you can see that
the entire 40 seat premium-economy section makes British Airways roughly as much as the
entire economy-class section. Going up to Business Class, there are 48 seats sold each
for $6,723 making the airline $322,704. The 14 first class seats are sold for $8,715 each
or $122,010 total. So, once again, the 14 passengers at the front of the plane make
the airline more money than the 122 at the back of the plane. In total, the three premium
cabins–premium economy, business, and first–make the airline on this flight $550,034. That
means that 45% of the passengers account for 84% of the airline’s revenue!
Now, I need to add some caveats. There is no airline on earth that makes half a million
dollars for a six hour flight over the Atlantic. If they did, they would be swimming in money.
The fares for this particular routing are significantly higher than the average fare
paid for that flight because they’re non-stop fares between two high-income, high-demand
cities. Of course, a majority of the passengers on that flight will not be traveling between
London and Washington, they’ll have connected. If you originate the ticket in, say, Stockholm,
and connect onto that 777 flight to Washington the economy class price drops to $392, the
premium economy to $1,150, the business class to $3,025, and the first class to $5,564.
But the proportions are still roughly the same. A vast majority of the revenue comes
from a minority of passengers. This particular British Airways 777 is also a very premium-heavy
configuration because British Airways is an airline that focuses a lot on premium travel,
but still, on average, 2/3 of any airlines revenue comes from passengers in First, Business,
or Premium Economy class but this wasn’t always the case.
In the beginning of commercial aviation, there weren’t really any classes because everything
was premium. That’s not to say that planes were very luxurious–a 1920s plane looked
like this–but flying was just so expensive that the experience of flying was the luxury
itself. It’s kind of like how you don’t see Virgin Galactic selling first, business,
and economy class seats on their planned tourist flights to space. The experience itself is
the luxury. Once commercial space travel becomes commonplace, we’ll almost certainly see
a classification of the experience but until a transport method is at a cost where it’s
attainable to the normal person, it’s all first class.
In 1950 a round-trip coach fare between New York and London was $675–adjusted for inflation,
thats $6,800 today–roughly the same price as a first-class ticket on the same route
nowadays. It’s the exact same type of passenger flying in both these seats. What’s changed
is who’s flying further back in the plane. So the story of the development of airline
classes really isn’t the story of how airlines developed more and more luxurious seats, it’s
how they cut costs to allow more and more people to fly. It’s also a fascinating demonstration
of economics. Airlines have figured out a way to sell the same product for different
prices to different people. The overall product that airlines are selling is the same no matter
which class you’re flying–a flight from point a to point b. What’s different is
the experience within the plane. The first classification of air travel happened
in the 40s and 50s. A significant amount of revenue for airlines at the time came from
contracts for air-mail routes with the US Postal Service. These flights flew with many
stops often overnight or at odd hours. While the planes mostly carried mail, they still
had a passenger section. The first class fares got you, for example, on a non-stop flight
between New York and Chicago while the coach fare might get you on a mail flight that left
at 2am and stopped in Pittsburgh and Cleveland on the way to Chicago. While the fare was
cheaper and the flight took longer, the experience onboard the plane was largely the same.
It wasn’t until 1952 that airlines started selling the same flights for different prices.
One airline, for example, sold standard class one-way tickets between New York and London
for $395 and tourist-class tickets for $270. It was the exact same flight on the exact
same plane–the difference was in the ticket. Tourist class tickets had to be purchased
in advance and had no flexibility–you had to fly on the exact flight the ticket was
purchased for. As the name suggested, these tickets were primarily for tourists. Tourists
plan trips far in advance and don’t really need flexibility so it was no problem for
them to commit to one flight. The full-fare tickets were for the other type of traveller–the
business-person. Business travelers, first off, don’t typically pay for their own tickets.
They’re paid for by their employer so they individually don’t really care what the
ticket costs. Business travelers also require flexibility and generally don’t purchase
tickets until the last minute. At the time, it was common practice to just walk up to
the counter an hour before a flight and buy a ticket. That’s what the full-fare tickets
were for. Through this system, the airlines segmented the market into two categories based
on what people were willing to pay. Over the coming decades, this was the only large classification
system in air travel. Then, between 1969 and 1978 three things happened–the
747 flew for the first time, the Concorde flew for the first time and airlines were
deregulated in the US. The 747 gave airlines the space to experiment with luxury, the Concorde
gave them the reason to, and deregulation gave them the ability to. Previously, all
airfares were heavily regulated in the US and it was difficult for airlines to charge
the cost they wanted for different classes but with deregulation airlines now had full
control over their ticket prices. Now, at the time, much of the difference was still
in the ticket. Some airlines had introduced first class fares with nicer seats, but airlines
realized that they had to start treating the business-people who bought a full-fare coach
ticket differently than the tourists paying a discounted fare. More and more of those
business travelers were just paying the tourist class fare. It began by just physically separating
the passengers. The full-fare passengers would be seated up front while the discounted fare
passengers would be put in the back. Then, some airlines started blocking out the middle
seat next to the full-fare passengers. Finally, some airlines started to build cabins with
slightly nicer seats and better amenities. But, with exceptions, airlines avoided first
class. Most focused on capturing that middle tier of traveller because the Concorde was
going to be the first class plane for the rich and famous–regular planes would be the
business and economy class… at least that’s what they thought.
Of course, as you heard about in my last video, the Concorde failed… spectacularly. Airlines
avoided first class in the 70s and 80s because of the Concorde, but as they started to catch
on to the failure of supersonic flight, select airlines slowly reintroduced first class to
subsonic planes. But the effect is still seen today. Of the dozens of airlines flying transatlantic,
only six have a first class cabin. Back in the 60s and 70s the imminent perceived competition
of the Concorde really invigorated airlines to optimize that middle class–business class–and
we likely would not have seen it as early as we did without that looming disruption
to the industry. But there’s another trend to explain–first
class is going away… again. Let’s take a look at the seat-map of a Etihad a380. Each
economy class seat on this plane takes up 3.77 square feet (0.35 m²) of floorspace,
the business class seats take up 10.14 ft² (0.94 m²) of floorspace, and the first class
seats take up 35 ft² of floorspace (3.25 m².) On a flight from Abu Dhabi to New York,
economy class tickets are $1,253 round-trip, business class tickets are $6,140, and first
class tickets are $14,128. That means that economy class seats make $332 per square foot,
business class seats $605 per square foot, and first class seats $403 per square foot.
The difference between economy class and business class is huge–it’s a cramped seat versus
a bed–but the difference between business class and first class is just a bit more room
and some better food. It’s very hard for airlines to sell first class for much more
than business class since the experience is largely the same but the cost for the airlines
to run a first class cabin is significantly more. Therefore, more and more airlines are
taking out their first class to just put in more business class, it just makes more money.
If an airline could fill an plane full of business-class passengers it would–its been
tried–but pretty much no route has the premium demand to fill a plane-full of business class.
Everyone in economy, in the end, is just there to fill the plane.
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100 Comments

  • Wendover Productions says:

    Sorry for doubling up on aviation videos! Normally I wouldn’t do two videos of similar topics back-to-back but the video I was going to do just ended up not being interesting enough so I scrapped the script. I didn’t have time at that point to do a research-intensive video so I decided to do this topic that I already knew a good bit about.

    Also I know this is a pretty loose interpretation of economics, but hey, I liked the title.

    Also, one clarification on something I realized might be confusing during editing: airlines absolutely had first class in the 60s and 70s. It just wasn’t anything like the long-haul first class’ you see today. It was pretty much like domestic US first class today. The impact of the Concorde was the perceived competition it created for the highest-class of traveller. Some airlines decided to close their first class cabins and not compete while others improved their cabins in order to compete. Lie-flat seats or even angle-flat seats really didn’t become ubiquitous until the last 10-15 years with the demise of the Concorde.

    Also, first.

  • Audrey Nguyen says:

    “Everyone in economy is just there to fill the plane”. Damn that sounds sad since I’ll never make it to business with those prices!

  • ian davies says:

    The majority of flights are short or medium haul flights, and they only have economy class

  • michael zapin says:

    You're assuming that those 1st class seats are all occupied.

  • Spice Master II says:

    How does it work out for Southwest?

  • Miroslav Milosevic says:

    I wonder why some major airlines do not start flying no-economy planes between major airports. So, only business or business+first. Of course, airports would need to adjust by adding direct lounge access gates with full anonymity given to pax, but tickets on such planes would be actually pricier than same class aboard ones which feature the economy class too, because of the told anonymity and perhaps ability to have easier access to flight attendants, more different food etc. I know for BA1/2 but its a crappy A318 and has to make a fuel stop at SNN which makes it slower than a B77W or A388 flying LHR-JFK (even assuming you need to shuttle from downtown London to LHR a much longer distance than it takes to LCY).

  • Sung Yoo says:

    You telling us what you want and air company want. how many people can purchase first class even business class. that's greed.

  • Andrew M says:

    This is truly brilliant insight

  • Dmp Paul says:

    3:11. Hahahaha 😂

  • Neal Bai says:

    If those passengers were there to simply fill the plane, then why wouldn't the airlines just adopt smaller plane and fly a few business travelers to make things easy and profitable? Some parts of your words just don't make as much sense

  • BB B says:

    FUCKING POOR PEOPLE.

  • Daniel Nöchel says:

    Hhm that looks at 3:34 is really funny! For a todays passenger, this plane doesn't even look finished and nobody would even step in that plane if it was for free.. the passenger at that time was stunned by this way of traveling and would pay any price to take a seat in that thing… 'thought just gonna mention that comparison

  • Dynamic Solution says:

    I like Xanax because you barely remember flying let alone where you sat.

  • 42 Larson Fan says:

    And then there's Southwest

  • Yumi Victoriano says:

    My mom used to say, being on economy, business or first class doesn't matter. As long as you all arrive safe.

  • Big X says:

    I usually fly business class because my parents fly 1st class and I’m only in the business class it’s ok I gess

  • Jacqueline Renee says:

    I really don't agree with the maths on this one. I see the point that you're trying to make, but the economics of flight is a lot more complex then what you've made it seem.

    Even on an economy ticket, airlines will charge different amounts to sit in the exact same seat. Airlines sell according to booking classes that dictate the rules and price of a ticket. There are generally 7-9 seats on a booking class. Once these have been filled the next lowest available class that people will book is more expensive. That's why flights are generally more expensive the closer to the travel date (with some exceptions)

  • A scooter Ridin down bel air says:

    My little brother did first class For the first time now he calls economy class peasents LOL

  • MetaDragon says:

    What economy class is filled with: Tourists
    What premium economy is filled with: Rich tourists
    What business class is filled with: CEOs
    What first class is filled with: Nobody

  • Sanchez King says:

    The numbers on the Economy class are quite interesting. So basically carriers want as big of an airplane as viable for any given route to accomodate as many Business and First Class seats as they think there is demand for (as you cannot go the other way and make a very small plane with just Business and First) and the Economy is just a slightly better thing than just leaving the remaining space blank.
    It does remind me of the economics of Television. Everything you see on TV, all of it, all those mega millions spent on developing and producing programs, hiring celebrities, purchasing broadcasting licences, etc. etc. is all just done for those 6-8 % of total air time in which they can show commercials.

  • Fidelio says:

    Brilliant video. In 2017 you predicted airlines would take away first class internationally and today in 2019 I can’t find first class for my trip to Europe, only Business Class. It makes sense now!

  • Ilham Hamzah says:

    My cheapest flight was using Air Asia, it was 3 hours international flight from Malaysia to Bali and cost me around MYR42 or less than $10.

  • Zac_SR says:

    And then there is spirit airlines

  • Emma Brewbaker says:

    Delta has a first class too… it is as nice as some of these.

  • ezon says:

    I see many videos from Greece, that’s something I don’t see often. How come?

  • mr_godman says:

    So when I fly I’m just a filler :’(

  • db60615 says:

    Jokes on them……everybody uses mile upgrades for those business and first class seats!

  • Russell williams says:

    i have flowen to tokyo from london / amsterdam and i will tell you business is a huge leap from economy. i got it as a lst minuit upgrade for £390 and it was the best money i ever spent. it also handy for airlines because it not a huge leap to convince some economy fairs to spend extra for that once in a lifetime experience if ther is a space going

  • Karun Kirubananthan says:

    watching 1 hour before I take my flight

  • x_derx_it says:

    Since Sam Chui is still alive emirates will gonna make 20 thousands per flight 😂

  • Woking Sam Beare Hospices says:

    You can’t say that Concorde failed. It made British airways around 25 Million a year alone in profit. Catering for the top end business traveller. Most of whom were Americans. Yes it failed in sales largely to do with the energy crisis from 1973, but when the acquisition costs were written off by the mid 1980’s it made a lot of money fir BA.

  • Akash Dhar says:

    This video makes economy class people feel like 2nd class citizens..GOSH…. But thats the truth he revealed

  • Lucas Quintero says:

    hey mate, you forgot Avianca, it has bussiness and flies trans-atlantic from Bogotá to Munich,London and Madrid

  • J S says:

    The co. I work for, makes my fly in the cheap seats. My question is why don't gov. employees also have to do the same? Why are they better than the rest of us?

  • HDBoss 2019 says:

    Not 5,5 AND 64 dollars, say it all together with no and pls

  • Gary Vallone says:

    For God so loved the world that He gave His only begotten son that whosoever believes in Him shall not perish but have everlasting life John 3:16

  • Derya Baygan-Robinett says:

    Well I guess now you have to make a vid on the economics on premium economy the only one left out where did that class come from I can’t get a good result it’s more like is eco plus worth it (premium economy) plz help!

  • lonelyPorterCH says:

    I will always take the cheapest ticket^^

  • E1craZ4life says:

    Economy class is there to fund the embellishments to the premium cabins.

  • khizar129 says:

    you know why airlines are leaving out first class , its because majority dont fly on those.. you are making a simple thing into a huge complicated pile of numbers… who can afford to fly in first, first is just for show, busniess yes, ppl pay to fly in business because comfort and self pampering. airlines cannot survive on just first and business, the main reason tickets got cheaper so airlines can earn more

  • Damnit Bobby says:

    I saved 37% by mailing myself next day air.

  • RR RR says:

    The Piano music is Horrible . …. i dont fly …

  • Eggnog18 says:

    Holy cow when you are saying numbers, you only say "and" when you mean a decimal point. So, it's not two hundred and sixteen thousand, five hundred and twelve, it's two hundred sixteen thousand, five hundred twelve. It's extremely distracting hearing the word "and" thrown around every other number, when you should only be using it when talking about cents, in money terms.

  • Oliver Hancock says:

    Wait wait wait, so these rich fuckers essentially subsidize our plane tickets? Willingly?

  • Amir Abed says:

    Wait 876? I always see flights overseas in the 1-1.5 k minimum. Am I buying on the wrong sites??

  • dannypeck666 says:

    ryanair is apparently a communist utopia….
    no class

  • sagi alex says:

    For peasants like me. Ryanair is just fine thank you! We only fly 2/4 times a year for 3 hours each. For that dirt money i can sit on my ass and take it. Rather spend more during a week of holiday than to blow it on some 3-5 hour flight.

  • sasha fjnsjcjndnxnnsnnsnnrnnndndnnx says:

    Jokes on them, no matter the class I'm still getting to the destination. Sure it's uncomfortable, but I'm not paying twice the amount

  • steven walker says:

    My dad has been in concorde because he works at Heathrow and it looks prity bad

  • Marc Pagan says:

    Don't tell Socialists/Leftists…their heads will explode
    …..Econ 101: The rich, and those willing to pay more for a bigger seat, or a 100% refundable ticket
    …keep prices as low as possible for the rest of us people "exploited by evil Capitalism"

  • Markus Fischer says:

    "Everyone in economy is just there to fill the plane" – They should give out free tickets then 😛

  • Elijah Ford says:

    Godamn one percent. The proliteriet will seize the means of production!

  • Elijah Ford says:

    It was a common practice to just walk up to the counter before the flight, and by a ticket?! AWESOME!

  • Elijah Ford says:

    Premium CABIN?! I’ve never seen that. I just thought first class meant bigger seats and stuff.

  • Lukine Gluposti says:

    No, this is a YouTube video!

  • Dik Tracy says:

    Sounds a lot like the US tax paying system…

  • zatoichi101 says:

    Wow, this video is really, really bad news for people like me. I fly from the East Coast to Asia (China. Japan) about 4 or 5 times a year and I can only afford to fly economy. As as you very clearly outlined, the airlines will NEVER care about us folks in economy, which explains why economy class seats and space have gotten smaller and smaller over the years, despite the fact that humans are actually growing larger. So, my future on airlines looks very, very bleak. There is absolutely no incentive for airlines to treat economy class passengers well (including offering more space) at all. That sucks.

  • Faris N says:

    I would like to introduce the:
    Luggage Class
    .
    I wonder if they would add it in the future?

  • M T E says:

    if you pay almost $3000 for premium economy you're dumb. those seats usually are 100-200 dollars more than the standard economy fare

  • PipenFalzy says:

    I have never seen first class or business class ever filled. People won't pay that price or even company's except for a small few.

  • Ernest Hemingway says:

    Actually airlines make most of their money from Cargo. They make so much from Cargo, that if they could, they would only fly Cargo.

  • Jim Brewer says:

    My dad's company scrapped commercial aviation entirely and developed their own "fleet" of 4 airplanes (which he taught me to fly, with the boss's blessing) for different destinations, number of passengers, speed, level of opulence, etc, etc. They said that was one of the best business decisions they'd made in the company's existence. They could go wherever they wanted and when whether business or recreation, whatever they did the pilot got to do as well and they encouraged him to bring me along especially on hunting and/or fishing trips literally anywhere in the country or Canada! Those were some wonderful days growing up with a professional chief pilot for a father and being the eldest son. I highly recommend it!

  • Sheema Ashrafi says:

    Emirates Has Entered The Chat

  • Thanh Vu says:

    8:35 United dropped its Polaris first class, so now we are down to 5

  • Thanh Vu says:

    Wendover: "if an airline can fill a plane with business, it would…"
    BA001:"uh huh, been there done that"
    Wendover:"…but so far no one could"
    La Compagnie:"am I a joke to you?"

  • Pura Periculo says:

    I fly coach

  • Csilla Roja says:

    Very interesting video. You must like planes 🙂

  • lubisztosukoooo says:

    Based on how much white people would like to pay?its so rasist

  • James Grey says:

    New classes of steerage and cargo soon to be added.

  • Nash Struck says:

    Not true. Singapore Airlines has a full Business class flight once/day from SG to JFK.

  • Evironment TV says:

    i like it

  • TJBellamy99 says:

    I usually fly economy and will never buy anything higher than business.

  • Julien Dufour says:

    and the freight?

  • Andrew Rabbitt says:

    You missed Jet2.com on the trans Atlantic flights

  • Kishorekumar Sathishkumar says:

    Wendover pls see this
    https://youtu.be/XonQbZZsU-I?t=24

  • taotoo2 says:

    If economy is there just to fill the plane, then why isn't the BA london-washington flight a 757/767 with only premium cabins?

  • Emily Balcer says:

    Ahh yes, the modern day hierarchy

  • SuavestHades80 says:

    If the airline fills up business and first class, and they never do

  • Thanozzz says:

    4:46 Greece

  • pine cone says:

    Get the class system out of airplanes and nationalise the airlines. We shouldn't have to deal with their corporatist bullshit of either being crammed in the back half like sardines or paying a year's worth of wages because there are no sardine seats left. Fuck capitalism.

  • pine cone says:

    I'll say it again: FUCK CLASSISM.

  • Pascal Tsakiris says:

    4.50 heraklion greeeeece

  • Tim Schütze says:

    It's a nice feeling, flying in economy class, knowing the idiots in front of you pay most of your flight, just because they need more luxury for a few hours

  • imran saifi says:

    One thing you forgets is fare increased.

  • Romain V says:

    Seems like I'm gonna fill the plane again in a few hours

  • i2Goated says:

    100000th like

  • Joe O'Connell says:

    Incredibly interesting. Thank you!

  • Peter R says:

    😂 🤣😂 🤣😂 🤣 crash landing in a wicker chair. nice

  • bryan pebs says:

    I never fly economy class – not because I am rich but because I refuse to abuse myself. I would rather take 1 trip in Biz First than 3 trips in economy. Yes it means I now travel less, but when I do it's in comfort.

  • Hankdafishtank A says:

    turns out im just a plane filler

  • Ellen Taylor-King says:

    My gran got the chance to fly on the concord on its last run but said no because she doesn't like flying

  • Martin says:

    LCY to JFK is an all Business class plane i believe.

  • AstonMartinStig says:

    No wonder we get treated like shit in economy. I don't blame them anymore.

  • Gema Hoeksema says:

    I had the opportunity to go into the Concord in an air show, and it was pretty cool inside.

  • Petr pavlovich Romanov says:

    8:33 u have forgotten the aeroflot (russian airlines) we got the first class as well.

  • Claudio Avondo says:

    Tht's a real nonsense. Considering that, time is money, airline are wasting my time just to provide a luxury fly to someone who has nothing to do on their fucking life.

  • Brogamespro says:

    I cant afford premium economy class cuz im poor 🙁

  • jake playz says:

    Very good video, shout out to all involved

  • PigDemon says:

    How did he make a 11 minute video on seats?

  • Sn0wy says:

    With Captain class, you fly the plane… and get paid for it!

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