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- [00:00]
A
Foreign.
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B
Hello and welcome to the Death of First Class edition of Slate Money Travel, a special Slate Money miniseries all about the economics of travel. And this week we have Charles read from the Economist to talk about something which you might not expect in a world of increasing inequality, which is that the first class cabin in planes is basically disappearing. What happened to all of those people who used to fly in first class? We're going to find out with Charles Reed. Charles, welcome.
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A
Hello.
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And tell us who you are and how you managed to wind up learning about all of this.
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A
Well, I recently wrote a piece for the Economist about the decline of international first class fare flights. Many airlines are getting rid of their first class flights on international long haul flights completely. In America, for instance, a decade ago, virtually all planes crossing borders had first class seats. Now there's only about 20 left and the big three all want to eventually get rid of it completely in America. And so I wrote a piece answering that question. Why is it disappearing?
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B
Okay, so we will answer that question coming up on Slate Money Travel. So, Charles, I have this idea, tell me if I'm right about this, that call it the death of first class. Is first class a thing that used to exist and is now becoming an endangered species?
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A
Well, first class used to be the only class there was in the sky. What we now call first class actually started off as the only class in the sky. Then economy came along in the 1950s and then business class appeared in the 1970s and premium economy economy from the 1990s onwards. So yes, I mean, everyone flew first class back in the 1930s and 1940s and early 50s when only the very wealthiest people in the world could afford to travel. But then as travel has become increasingly democratized and more people have been able to take to the sky, this has become a increasingly niche product.
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B
So let's, let's walk through this. I mean, it's pretty obvious, I think, to most of us how compared to first class, the next thing that that would come along would be economy class. And economy class just makes perfect sense because you get to fly for the cheapest amount of money. Okay, understood. That explains a whole bunch about like how many people are flying and all of that kind of stuff. And then like a couple of decades later, there was this new thing called business class. Explain to me because I don't entirely understand this, what was the rationale there and how did business class kind of wind up slotting in between economy and first?
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A
Well, as first class got increasingly fancy and economy became increasingly basic after the Second World War and particularly by the 1970s, there was demand for products in between which wasn't quite as fancy as first class and wasn't quite as basic as economy. That's where business class in. And as business class began to improve in the 80s and 90s, we had the appearance of premium economy. To take the gap between that, in.
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B
Terms of the swankiness, if you will, when business class is first introduced, how swanky is first class? Like back in the 50s or 60s or whenever you first start getting business class by today's standards, would we recognize first class as being unbelievably swanky, or is it more akin to what today's business class might feel like?
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Well, today's business class has lie flat beds, which only appeared in the 1990s.
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So even first class didn't have that.
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No, no. I mean, it was British Airways invented British Airways put the flatbeds in first class in 1995 and then put them in business class in 2000. So first class in the past used to look very much what now looks like premium economy looks actually quite similar seats to what Norwegian Airlines puts in their premium economy cabin.
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B
That's fascinating to me. Back in the 50s, just to be clear about this, when business class is first introduced, first class to today's eyes would look a lot like premium economy. And that was considered to be too swaggy for normal people to afford. And so that's why. Or even like business people to afford. And so that was why they introduced business class, which would kind of be in between today's economy and today's premium economy.
- [04:46]
A
Correct. But I mean, it's also not simply. It's not simply the chair. But in first class, what you did get was, you know, silver service at your seat. So they would bring round, you know, a dressed lobster and then serve it to a plate on your seat. The cabin stewards were dressed like they were waiters. And at world's rankiest hotels, you had some of the world's best champagne served on these flights. And so business was to take away some of these extra features and deliver you a better seat and slightly better food.
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B
So a lot of the difference between originally, when it first came out, the real difference between economy and business and first was less in the seats and more in the food and service. And obviously the food and service difference is big now. But the thing that everyone notices, because when you, you know, when you fly economy, like most of us do, you have to, like, walk back past all of these swanky seats. The thing is, you notice is the swanky seats more than anything else. And that's, that's relatively new.
- [05:52]
A
That's relatively new. I mean, it was in 1995, British Airways put the first lie flat beds in first class. It. By 2000, British Airways had put lie flatbeds in business class. And so there was an arms race in terms of who can put the shrankier seats and beds in to the point where Singapore Airlines introduced some of the world's first suites in the sky. You had Etihad of Abu Dhabi. You had an apartment.
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B
So explain what happens in 2000. British Airways decides that it really wants to, you know, compete hard for business travelers. And it puts these lie flat seats in business class. Now, you know, put aside the crazy Etihad stuff at that point. Does that effectively mark the end of first class as a major profit center for British Airways? And they just decide they're going all in on business. Is that effective?
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A
I mean, because first class became swankier in response to business class becoming swankier.
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B
What was the main difference in 2000 when British Airways puts lie flat seats in business in 2000, what did they do to first class to make it, you know, a premium, premium experience?
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A
Well, a smaller cabin with fewer seats in, so you get more personalized service. The beds were bigger. More space per passenger, better food to drink.
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B
Bigger beds, right? We all want bigger beds. Bigger beds are great, but these are distinctions that, like, we plebs in the economy barely notice. But I guess if you're in business, you can kind of squint and see the people in first with like, bigger beds and more expensive champagne, and you're like, ooh, maybe I want that.
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A
Well, that's why first class is in decline, because what people actually want to fly premium class is a flatbed and more privacy. So business class getting swankier actually disrupted first class in that people going, oh, should I really pay 2, 3, 4 times as much money for a little bit more room in my lie flatbed and a little bit better champagne. And lots of people decided, no, it's not worth it. I'll just go business class. So that, that started to disrupt first class from below.
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B
So I, so I have this idea that like, as if, as you were saying, like, the first thing that people want back in, like the 40s is, you know, better service and better food. And so they pay extra for that. And then the second thing that people want is the lie flat beds and being able to sleep. And so we eventually move to that being the primary differentiator and the reason why people really want to upgrade. And then I think what happens is the thing people really want most of all is to be able to set their own schedules. And so that then starts becoming the move from first class to just flying privately.
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A
Yeah. So flexibility. So first class cabin, there's no dinner time. You can just ask for dinner to be served at any point you want during the flight. But even that airlines can't offer full flexibility on their first class flights because ultimately they have a fixed timetable. And this is something that private jets can offer is set your own timetable, set your own schedule. We'll wait a few more hours for you if your meeting is slightly delayed. And so that's the proposition that flying in a private jet offers, that first class, private can only compete with in a few limited ways.
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B
So you have the rise of partial ownership, netjets, all of that kind of stuff, you know, shared jets. That helps to bring the price of flying privately down to somewhere approaching the ballpark of how much a first class ticket costs. It's not quite that cheap, but it's, it's not that much more expensive. To what degree do you actually have that kind of flexibility? If your meeting does stretch on for another couple of hours and you've booked this netjet, like, how does that work? Do you have that flexibility or are they like, no, you've booked it for this time, you have to fly at this time.
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A
I mean, it entirely depends on your booking and what you have with your broker, of course. So sometimes you can book the private jet for the day and leave any time you want that day. Other times you can get some very cheap flights on empty legs. So if somebody paid for flight to go to America and you bought the empty leg for the plane to come back, you're going to be more on a schedule. But the thing is that, that's, you know, you probably will pay only a fraction of the actual cost of running that empty leg back across the Atlantic. So. So it very much depends what you've agreed for your broker and how much you're willing to pay. But the point is that you've got ultimate flexibility to negotiate that if you fly privately. But if you phone up your airline and say, well, I didn't like your 10 pass free, could you delay that flight, you know, three quarters of an hour? I mean, that, you know, the person's going to laugh at you.
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Even heads of state don'.
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Well, not necessarily, though I've heard that Theresa May has had a lot of private jets from the Royal Air Force on standby at various Airfields.
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B
Exactly. Because she can't just ask British Airways to lay on a plane for her. But here's the question which I have, because, you know, I'm an American now, is this whole rise and fall of first class that we saw on British Airways and various other airlines around the world, it seems to have not happened in North America, like certainly not for domestic flights. Is that just because there are many fewer red eyes, many fewer overnight flights, and that really the point at which people want lie flat seats is to be able to go to sleep overnight?
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Correct. So America is not quite big enough to get the benefit. So if people are only flying somewhere for an hour, one, two, three hours, I mean, they're just willing to slum it in a seat which is not that much big of an economy. Maybe you have the middle seat blanked out, but people are just willing to grin and bear it for one, two, three hours. I mean, there's even been reports that Prince William and Meghan Markle have been flying on EasyJet flights. When they fly from Britain to the Mediterranean and so on what you might call domestic US or flights within Europe. People aren't willing to pay for masses of legroom. They might be willing to pay for a little bit extra legroom, but not anywhere near, you know, they're not willing to pay for life at seats and showers because it's just, you know, they're just sitting down for an hour or two and they're really willing to do that. The real benefit of paying thousands of dollars for one of these tickets is to save an overnight stay in a hotel or be able to get back to your family and be able to turn, you know, instead of having to fly out during the day or having a extra night in the hotel room to recover, be able to use that overnight time to fly is, is extremely valuable. And so this is why business class on international flights to and from America has got swankier. But why domestic first class within America hasn't got swankier. In short, that's just you that domestic first is not much better than economy. Extra should be what it really is called. But the same process has happened within the European Union as well as within the United States.
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B
In terms of first class being squeezed from both sides, as it were. The people who want ultimate flexibility are going private and everyone else is happy with this increasingly swanky business. Is the top end of the private jet market expanding? Is that happening globally? Or is that again, something which you generally see more in the long haul international flights?
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A
I think it's happening across the world. And this is because through things like NetJets and fractional ownership and various other online booking services, the average utilization of the private jet is increasing. And this means the cost of buying the asset can be shared between a greater number of users, resulting in lower prices. So I think it's partly that prices are relatively falling compared to airline travel for private jets and that's what's fueling the rise of this. I mean also remember though, in America, because of Donald Trump's tax cuts, means that rich people in America can now offset the cost of buying a private jet off their taxes in the first year. That's been given a huge tax incentive to private jet ownership and use. And also in America, that's what's encouraging more people to buy and use private jets. Although I suppose there is a bigger question of whether that is a sensible use of American taxpayers money doing that.
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B
It is a significant tax expenditure which is resulting presumably in a significant increase in aviation related carbon emissions.
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A
Right, exactly. So the point is, is that in America there are these now massive tax breaks for this. Not only is is that true, the missions from private jets or flying across borders at least are completely unregulated, both by the Paris climate change deal. And I mean aviation broadly is excluded from the Paris climate change deal, but there's another system called Corsair which regulates those. Point is that international private jets are excluded from that as well. So carbon emissions are for cross border private jets entirely excluded. There's these massive tax breaks for this and the result is that we're going to see a huge increase in the share of carbon emissions coming from private jets. If the emissions from private jets remain the same or increases, we'll see an increase mass carbon emissions produced by private jets rising from 0.9% of the world's carbon emissions to about 4% between now and 2050. And if we see that only, well, maybe the top few thousand or top tens of thousand people actually travel using private jets. There's a question of why should they produce so much of the world's carbon emissions and secondly, why should taxpayers be subsidizing doing it in that I don't have any problem if people spend money which has been taxed on choosing rather than buying bottles of champagne, whether they want to fly on these jets instead or spend it on something fast cars or something. The objection I have is that everyone else is paying for this. Whereas in fact carbon emissions should be environmental damage should be taxed and not subsidized by everyone else sitting at the back of the plane, or even the less fortunate souls who can't afford to fly whatsoever. Why should they pay for rich people to fly in planes? It's fine if rich people spend their money, they pay tax on this, but.
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B
It'S the taxes should be high and they should reflect the carbon footprint of the planes. This is a question we've touched on on this show in the past, but I'd be interested in your take on it. When you fly in a premium cabin, whether it's premium economy or business or first in a commercial flight, how much should you sort of mentally multiply your carbon emissions to account for that?
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A
So the World bank worked this out for its own staff. So it thinks that flying on premium classes, so that's a premium economy first in business produces about three to six times as much in terms of carbon emissions than it does flying economy. And they calculate that it's approximately 10 times worse to fly on a half full private jet than it does to fly per passenger in a ordinary economy flight.
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B
So like as a rule of thumb, if my carbon emissions for normal flight are X, then if I'm flying private It's 10x and if I'm flying in a business class, it's maybe like 3.
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Or 4 x 3 to 6 times. I mean it depends on the type of business class seat and that there's some business class seats which are fancier and take more space and therefore.
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But there's no such thing as a free carbon lunch. If you have a nicer flight, you should definitely consider that to be a significant carbon expenditure.
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Well, arguably there is a free carbon lunch which is you take an electric train where the electricity has been produced by renewable electricity. And this is one of the reasons why the, the rail industry and the passenger rail industry, after being down in the dumps for decades, is currently being revived in America by people such as Brightline, which is now called Virgin Trains. But this is one reason why train travel is coming back, particularly on routes where it's competing with short haul flights.
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B
So, okay, I will do that. As a good environmentalist, I will try and take the train as much as I can and then I will, if I do wind up in economy as I usually do, I will at least be able to feel smugly superior to the carbon hogs up front. So, Charles Reid from the Economist, thank you very much for joining us on Slate Money Travel.
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A
Thank you.