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Why first-class tickets cost so much

CNBC logo CNBC 11/20/2019 Shawn Baldwin

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Delta, United and American Airlines make a lot of their money at the front of the plane — specifically, according to analysts, selling business- and first-class tickets on long-haul, premium-heavy flights.

In August, more than 6.4 million people flew in premium seats on North American flights — about 9% of the total 67 million seats occupied, according to industry data provider Cirium.

For its quarter ended June, Delta Air Lines announced operating revenue of $12.5 billion, $1 billion higher than the previous year. According to the company, the revenue hike included a 10% increase in premium product ticket revenue.

Industry consolidation and a strong economy in recent years has allowed the airlines to invest in more fuel efficient planes with better cabins focusing on premium classes.

One focus has been revamping business class.

The front of the plane on international flights has become more of a hybrid of first and business class, and that top cabin is even showing up on cross-country flights with many of the same amenities found on flights to Europe.

And low-cost carrier JetBlue is also trying to grab a slice of the business-class market as well.

In April, JetBlue said it intends to start multiple daily flights from New York to London flying the long-range version of the Airbus A321 which will include its premium service called Mint. That's JetBlue's version of business class, except it can be much cheaper than the competition.

The airlines use a strategy called "airline revenue management" to maximize profitability, essentially prioritizing passengers based on fares.

According to Janet Bednarek, a professor at the University of Dayton, "the airlines are getting much more sophisticated and they're getting to the point where they can charge just the amount of money it needs to fill those seats because that's how they make their money. It's butts in seats."

But even though airlines are decreasing the amount of space they are allocating for first-class travelers, carriers including Delta, United and American for the time being have found big profits in premium cabin services.

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