With limousine pick-ups and on-board chefs, Asia's premium airlines are investing hundreds of millions of dollars on luxury services in a bet on a rebound in business from the wealthy, even as low-cost carriers fly high with the booming middle class.Although business and first-class traffic has fallen significantly in the last few years as companies cut costs, carriers such as Singapore Airlines, Cathay Pacific and Qantas are estimated to still earn about 35 to 40 percent of passenger revenue from the high-margin segment.Yields per premium passenger are around four to five times higher than those for economy class, underscoring why airlines are keen to spend money on amenities that range from luxurious cabins to fine dining.Asia-Pacific airlines are the most profitable in the global aviation sector, industry data shows."If you don't upgrade your products, you are always going to be under pressure to drop the price more significantly," Tan Pee Teck, SIA's head of product and services, told Reuters in an interview."So, when people see the investment, see something new, fresh, there'll always be people who are going to try it, just like the way the A380 was launched."While low-cost carriers such as Malaysia's AirAsia and Indonesia's Lion Air have been grabbing headlines with record aircraft orders to feed rapid demand for travel, the battle for Asia's wealthier travellers has also been heating up.Singapore Air has hired BMW Group's design unit, DesignworksUSA, to roll out new first-class seats featuring more privacy and personal stowage space.The first-class cabins, along with more comfortable seats in business class developed by another design firm, will be installed on Boeing 777-300ERs later this year. SIA will showcase the new products at a media event on July 9.SHIFTING LOYALTIESThe launch comes as SIA, considered the gold standard for customer service, and famous for its iconic "Singapore Girl" in sarong kebaya uniform, faces pressure from free-spending Gulf carriers.Emirates, Etihad Airways and Qatar Airways are investing heavily to attract travellers with fleet upgrades, extensive networks and new perks.On its A380 flights, Emirates offers shower facilities for first-class passengers and an on-board lounge with open bar in first and business class cabins. It also provides a complimentary chauffeur service to first- and business-class passengers in more than 55 cities.This has not gone unnoticed. "On my long-haul flights these days, I will go for Emirates over Singapore Airlines whenever I can," said Barry Lea, who has flown business class on SIA and Cathay."I find their in-flight entertainment top notch. It's all very well taking Singapore Airlines and being sort-of attended to by Miss Worlds but, on a 17-hour flight, the novelty wears off."Emirates is relentlessly expanding its network from Dubai and this has given it a strategic advantage."Schedule is always going to be key," said Nick Rees, who manages Emirates' Singapore and Brunei operations. "Where we see our network being particularly strong is, we have one stop in Dubai to 35 points in Europe."Ease of connections is a key factor for snagging premium business, and Singapore's location as a gateway into the fast-growing economies of Southeast Asia means the city-state's Changi Airport is still an important hub."Most carriers are putting their best product into Changi because of the competition here," said Rees.Qantas, which has a five-year alliance with Emirates, unveiled a new Singapore lounge in April, with seating for 460, 20 showers and many 80-inch television screens.As Asia's growth adds to the ranks of the region's super-wealthy, millionaires from countries such as Singapore, China, Hong Kong and Indonesia are splurging on premium air travel.Asia-Pacific, second only to North America, drove global High Net Worth Individual (HNWI) population growth in 2012, increasing its HNWI population by 9.4 percent to 3.7 million, Capggemini and RBC Wealth Management said in a report."You get Indonesians travelling to the US to look at boutique hotels to purchase at a good price. And they are travelling in suites, they are travelling in first class and business class," said Tan."Certainly, the relative growth of the premium segment doesn't match the low-end growth. But there will still be growth and, for as far out as we can see, this is a segment we think will be sustainable."Timothy Ross, Credit Suisse's head of transport research for Asia-Pacific, upgraded his rating on SIA to "outperform" from "neutral" last month, citing sustained growth in demand, the impact of lower jet fuel prices and the emergence of data supporting a recovery in business travel."Its challenge is to ensure that it is using its premium product on routes that will support a yield premium and not to gold plate product in markets where customers won't pay for this," Ross said.Last year, SIA announced it would be stopping its all-business class, 19-hour flight connecting Singapore and Newark later in 2013, the longest scheduled non-stop route in the world, in an industry hit by high fuel costs and weak demand.CAVIAR AND LOBSTEROther Asian airlines are also eyeing the premium market.Malaysia Airlines and Thai Airways have introduced A380s and are making a pitch for the wealthier traveller, although they are hampered by less extensive networks.Malaysia Airlines began serving caviar and lobster to first-class passengers on some routes last year, and has introduced first-class travel on its services from Kuala Lumpur to Hong Kong and Paris.Garuda Indonesia, in its largest investment ever, is taking delivery of 24 new aircraft this year as it expands further into the long haul and premium market."We are definitely seeing an increasing trend of passengers upgrading and opting for our executive class when travelling with us," said Garuda's chief executive Emirsyah Satar.Garuda plans to launch its first direct Jakarta to London service this year with Boeing 777-300ERs equipped with eight first-class suites. The suites, featuring outsize seats that can be converted into full-flat beds, will offer live broadcast from six global channels and wi-fi connection.Pre-flight concierge services will include a limousine pick-up and a personal butler. Passengers will be pampered by a chef on board and can enjoy in-flight entertainment on a 23.5-inch touch screen LCD. The aircraft will also have 38 executive-class seats that can also be converted into a full flat bed."As travellers grow increasingly affluent, the demand for exceptional travel experiences is stronger than ever," Satar said. Source: Reuters
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