Billions are being spent to pack business-class seats with engineering innovations and fancy features.

August 3, 2013

The Race to Build a Better Business Class


IN a confidential test lab in a remote office park near the Frankfurt airport, a small Lufthansa team holed up for five years, refining one of the German airline’s most closely guarded secrets. They called it the V concept. Six feet six inches long and almost two feet wide, the V concept is the German carrier’s latest weapon in the fierce competition among global airlines. It is designed to withstand shocks 16 times the force of gravity and comes with a cozy padded footrest. It is a new business-class seat, and if you are traveling round trip from Frankfurt to New York, it can be yours for about $5,000. “Business class is where competition really is serious,” says Björn Bosler, the airline’s manager for passenger experience design, business and premium, who led Lufthansa’s team of dozens of seat designers and engineers. Bob Lange, senior vice president, head of market and product strategy at Airbus, the European plane maker, agrees: “There’s an arms race going on among carriers.” Billions are being spent on research and development, architects, industrial designers and even yacht designers to pack seats with engineering innovations and fancy features. Just fabricating a single business-class seat can cost up to $80,000; custom-made first-class models run $250,000 to $500,000.Those who fly coach may have had a glimpse of these expenditures as they shuffled past the elaborate reclining, angled, semiprivate accommodations in business and first class on their way to the knee-scraping spaces and overstuffed overhead compartments in the main cabin. Travelers in business and first class may represent 10 to 15 percent of long-haul seats globally, but they account for up to half of the revenue of airlines like Lufthansa or British Airways, says Samuel Engel, a vice president at ICF SH&E, an aviation consulting firm. Carriers vying for the attention of these passengers, who have money or corporate accounts that pay for their travel, are counting on good design to escape the grinding commodity nature of their business.

But there is only so much space inside a plane. As the more lucrative seats expand, the coach section often contracts, with more seats jammed into the same cabin space and more discomfort for coach passengers.

“The seat is one of the few elements that an airline can actually make its own,” says Patricia Bastard, an architect and designer who has worked with Air France on its first-class cabin. “There are very few elements like it inside an airplane. There’s customer service, of course. Maybe there’s a bar. But seats are unique to the airline. Seats are critical.”

Lufthansa, Europe’s largest airline and the world’s fourth largest in terms of passengers, is investing $4 billion to improve its cabins, offer satellite-based Internet and upgrade its onboard entertainment system. But the new business-class seat, which first appeared last year on the company’s new Boeing 747-8 planes, is perhaps the boldest attempt to lure the high-value passenger. The seat research, design, manufacture and installation accounts for roughly a third of that $4 billion investment, says Mr. Bosler — more than a billion dollars. Eleven planes are now outfitted with the new seats, and Lufthansa is expected to install about 7,000 of them on 100 wide-body airplanes by 2015.

Lufthansa’s task — like that of all the big airlines — was to create a special environment for those big-spending travelers within the inflexible boundaries of an aircraft fuselage.

“The challenge was finding a solution that provides all customer benefits but also tries to save as much space as possible and get as many passengers on board as possible,” Mr. Bosler says. “There’s only one way for Lufthansa to make money. It’s with passengers on board.”

THE first airplane business-class sections date to the 1970s, when the seats were like oversize, padded armchairs that could recline about 40 degrees. More comfortable seats for frequent business travelers came with the arrival in the 1990s of planes that could fly nonstop almost anywhere in the world. This new generation of ultralong-range airplanes that could fly for 10 to 14 hours — like the Boeing 777 — meant passengers wanted to be able to get real sleep, not just a fitful, head-snapping catnap.

The growth of carriers from the Middle East and Asia also set off a transformation in cabin design. Emirates, for instance, created semienclosed suites for its first-class passengers. It installed showers on its Airbus A380 double-decker planes, as well as large bars behind the business-class cabin where passengers could mingle throughout the flight. Over a short span, passenger expectations changed.

“Business class today is what first class used to be 10 or 20 years ago,” says Jacques Pierrejean, a designer based in Paris who helped create the first-class cabin for Emirates.

The business and corporate travel market is by far the most lucrative one for the airlines. Business travelers are expected to spend $273 billion this year on airfares, according to a forecast by the Global Business Travel Association, a 4.3 percent gain from 2012.

“Airlines are rational actors, and where they make their investments tells you where they get their revenues from,” Mr. Engel says. “Despite all the technological advances, and e-mail, and videoconferencing, nothing replaces face-to-face meetings. This is why business travel remains so important. And for business travelers to remain productive, they need to fly relatively comfortably over long distances.”

This growth in business travel has spurred considerable innovation in the front of the plane. But finding the right balance among space, comfort and seat features is tricky. Until about five years ago, the norm was for business seats to provide a lie-flat surface at an angle, what was called a “faux flat,” says Mark Hiller, chief executive of Recaro Aircraft Seating, based in Germany, one of three large seat manufacturers. But frequent fliers complained that they slid down their seats during the flight.

Now airlines are increasingly trying to fit fully flat beds for business class. But these seats require more space, which typically means losing about 10 percent of the business-class seats. British Airways, struggling with trying to fit a 73-inch bed inside the 46 inches separating two seats, came up with a design in which half its passengers sit backward, says Peter Cooke, the airline’s design manager. He calls it “the yin-yang configuration,” and it can pack 56 business seats in just seven rows aboard some Boeing 777s by fitting the broader part of passengers’ anatomy (their shoulders) with the narrowest part of their neighbors’ (their feet). “By far,” he says, “it’s the most space-efficient configuration.”

The downside, obviously, is a basic disruption in the traditional seating arrangement aboard a plane. Travelers face each other, risking awkward eye contact. Mr. Cooke says passengers have become used to this quirk — they accept it on trains — and don’t mind flying backward.

Other formations include a design known as the herringbone, which is used by Virgin Atlantic. Seats are staggered diagonally, allowing tighter spacing between the seats. But it means sleeping passengers’ feet stick out in the aisles.

The latest trend is higher-density seating, now used on Emirates, Swiss and Delta, with slightly shorter beds and narrower seats. The trick here is that when a seat unfolds into a bed, it slides under the armrest of the passenger in front.

“It’s a very demanding environment,” says James Park, a designer based in London who has worked with Singapore Airlines and Cathay Pacific. “A business-class seat has to be a working desk, an entertainment center, a dining facility, and it’s also a bed. It also needs to be comfortable in all those configurations.”

Few of these innovations have occurred on American carriers, which have been locked in a scramble for survival over the last decade. Their business model has amounted to jamming as many people as possible on planes with little money to spare on new designs.

But that is starting to change. Delta, United Airlines and American Airlines have all outlined large investments to install new business-class seats, for international flights and transcontinental legs — from New York to Los Angeles or San Francisco.

“Only a few years ago, all domestic carriers were chasing the commoditization of the business,” says Glen W. Hauenstein, Delta Air Lines’ executive vice president for network planning, revenue management and marketing. “That didn’t work. It was a spiral to the bottom.”

Delta, for instance, plans to overhaul its entire long-range fleet by next summer, rolling out a new business-class seat on international flights. The company does not have a first-class cabin, focusing instead on business and coach.

“We cater to corporate clients,” Mr. Hauenstein says. “That’s our sweet spot. And few have first-class policies. American corporations are cost-conscious. We’re a lot more socialistic than we think. And we don’t have a lot of oil sheiks or Russian billionaires.”

IN 2007, after reviewing the available business-class seats on the market, Lufthansa decided to design its own. It hired a design firm, PearsonLloyd, a furniture specialist based in London that had developed a first-class seat for Virgin Atlantic.

Lufthansa polled about 3,000 travelers and employees to establish a list of basic requirements for its new seat. Among them: it would have to become a fully flat bed with a minimum length of six feet; provide adequate privacy but still be open to the rest of the cabin; have ample storage space; and provide comfortable sleep. In addition, Lufthansa did not want to lose more than 10 percent of its business seats.

Lufthansa found that passengers put a lower value on having direct access to the aisle than on having a longer, flat bed. The suggestion was surprising. Many airlines like Singapore and Etihad Airways have made aisle access a big selling point — meaning passengers sitting by a window would not have to climb over someone else to get out. But for Lufthansa, bucking this industry trend meant it could fit more seats in a row — six as opposed to just four.

Over the next two years, the airline refined its sketches. It decided the seat would not need wings on the headrest, a feature common in coach to keep the passenger’s head from slipping during sleep, but deemed superfluous in business class where seats recline fully. The massage function on the seat, once viewed as a particularly tempting feature, was also dropped because it was little used. The seat height adjustment was abandoned for the same reason.

By eliminating these features, Lufthansa managed to cut down the number of electric devices that drive the seat’s movements, reducing potential for breakdowns and costly maintenance. Lufthansa also installed an air-cushion system that required less maintenance than foam, which has to be replaced every three to four years.

There were other new features: an ottoman to rest the feet, more storage, a wider screen, and a foldable table that can rotate to allow a passenger to leave a seat even if a meal tray is on it. When the seat turns into a bed, the armrest lowers, providing more sleeping space.

In 2010, halfway through the development program, Lufthansa tested the seat with passengers on a real flight. The seats were in a secret compartment on the airline’s Frankfurt-to-New York daily flight. Over two months, 1,340 passengers tried them. Their comments led to more tweaks: designers added a small separation on a common tray between each pair of seats, so that passengers’ drinks wouldn’t touch.

“All airlines are different. Their clients are different. The body types sometimes are different,” says Luke Pearson, a designer based in London who designed the seat with Lufthansa. The typical Lufthansa business-class passenger is a man in his mid-40s who travels for business every other month. Germans and Americans account for half of Lufthansa’s business passengers.

“Airlines need to know their demographics and what is their culture of travel. Lufthansa have a very good understanding of their clients,” Mr. Pearson says.

The airline says it received more than 3,500 mostly positive comments from passengers during the seat’s first months of service.

Still, while travelers prefer the new Lufthansa seat to its predecessor, the new seat has not won unanimous approval. Some frequent fliers have criticized Lufthansa’s decision not to offer direct aisle access, or the way passengers’ feet converge on the same footrest (although a partition separates them). One reviewer on the Business Traveller Web site said the V-shaped configuration was “nice if you are traveling with someone, but does make you feel a bit more duty-bound to speak to the person next to you if you are on your own, as there is no privacy screen to divide you.”

Another frequent flier offered this faint praise: “The new Lufthansa Business Class is leagues ahead of the old business class. This is due to the fact the Lufthansa had one of the poorer offerings on this class of service.”

When seats in the front of the cabin get more attention, they create a weight problem for the plane as a whole. Airlines, trying to trim weight to cut fuel costs, have sought to balance out heavier seats in the front, in part, by looking for slimmer and lighter seats in coach, ones in which the seat frame is made with high-grade aluminum or carbon composite rather than welded steel. Some connections are even made of titanium. Attention to such detail has become critical: cutting 2.2 pounds can save as much as $800 a year in fuel cost per seat, according to Mr. Hiller, the Recaro executive.

On one of its seats destined for short-haul domestic flights, Recaro moved the magazine seat pocket away from the knee area to the upper edge of the seat above the tray, providing a couple more inches of space. Bulky foam padding on seat cushions was replaced with mesh, like modern office chairs, and the backrest is about two inches thinner. The seat weighs just 11 kilograms (24 pounds), down from 20 kilograms for previous generations. It is also “prereclined” at a 15-degree angle but cannot be adjusted.

“In our limited space,” says Carole Peytavin, vice president for research and development at Air France,“the question we need to ask is, who is willing to pay for what level of comfort?”

PASSENGERS still pick airlines based on the availability of flights and schedule, says Mr. Lange of Airbus, a former vice president for marketing there. “But the cabin product is now right behind that.”

This is especially true when it comes to business-class clients. “The business case for airlines to renew their business class,” he says, “is driven by their calculus to gain market share.”

Generally speaking, a first-class seat takes up the space of six to eight coach seats and a business-class seat takes up about four coach seats. The same is roughly true for ticket prices: first class is generally more than twice the price of business; business class is usually four times the price of coach.

Mr. Hauenstein of Delta explains that even with fewer seats in its business-class cabin, an airline can make more money. On its Boeing 747-400s, for instance, Delta went from about 65 cradlelike business seats to 48 flat bed seats. Yet while the total count dropped, Mr. Hauenstein says the switch to better seats increased the profitability of its fleet.

The reason lies in a dark science perfected by airlines years ago, known as revenue management. On any given flight, airlines generally try to maximize their profits by selling similar seats at different prices. The basic insight, which American Airlines figured out before others, was that you could make more money selling 100 seats at 100 different fares than offering every seat at the same price.

In business class, there are typically four buckets of prices, ranging from $2,000, for tickets bought far ahead of time, to $6,000 for last-minute walk-ins. If the seat experience is more pleasant, the airline can charge a premium. Delta decided it could sell more of the more expensive fares, and fewer of the less-expensive ones, since business passengers often buy tickets close to the flight date.

“The old cabin was rarely full,” Mr. Hauenstein says. “But if demand exceeds supply, that’s a good way to make money.”

There’s a saying in the airline business that seats are perishable items. If they go unsold on one flight, they cannot be sold anymore. Likewise, the seat itself has a limited life, which airlines and designers say is about seven years. After that, it looks stale. Other airlines come up with something new and exciting. Passengers expect a fresh look.

And so, by the time Lufthansa is done installing all its new seats throughout the fleet, the airline will have to look for a replacement.

“We’ve already started thinking about a new seat,” says Mr. Bosler. Maybe this one will come with a cup holder.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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