U.S. airlines doubled down on high-end travel after the COVID-19 pandemic to drive up profits and reduce their vulnerability to economic swings.
The strategy is paying off as the margins of carriers selling premium seats have held up despite a slump in overall travel demand. Strong demand from affluent travelers is helping airlines offset a pullback in spending by price-sensitive customers.
Delta Air Lines last week reported a 5% year-on-year jump in its second-quarter premium ticket revenue, compared to a 5% decline in main cabin revenue. The 10-percentage-point gap was the widest since the pandemic, helping it post a double-digit margin in the April-June quarter. Similarly, premium cabin revenue helped United Airlines mitigate the financial hit from operational constraints at Newark airport near New York City — one of its largest hubs — and increase its earnings in the latest quarter. United's premium revenue rose 5.6% in the June quarter from a year ago. Its overall passenger revenue grew just 1.1%. The industry saw a similar trend in the first quarter when President Donald Trump's sweeping tariffs raised the specter of an economic recession, hammering airline bookings.
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