Lufthansa's new premium economy seat

Lufthansa, Germany's largest airline, has unveiled its new premium economy class, part of a €3 billion ($4.9billion) investment in seats to catch up with fast-growing rivals from the Middle East.

The airline said the new class would first be available on long-haul flights from November on its Boeing 747-8, flying to destinations such as Washington DC, Los Angeles or Hong Kong.

Lufthansa is following around 40 other airlines that already have a premium economy class such as British Airways, United or Qantas.

The premium economy concept has been around for more than a decade.

Lufthansa Passenger Airlines Chief Commercial Officer Jens Bischof said the airline had had sleepless nights about whether to introduce a premium economy class but was comfortable now the group had upgraded its business class, meaning there was enough of a difference between economy and business to justify the introduction of a premium economy.

He said he believed the product was of a high enough quality that the airline would be able to snatch customers from rivals.

A return flight in premium economy, which give customers more luggage allowance, more space and bigger entertainment screens among other benefits, will cost on average €600 ($979.5) more than a regular economy ticket, but far less the average €2,000 mark-up for a business class seat, Bischof said.

"The biggest question is whether businesses will now book the class for those travelling on business," airline consultant Gerald Wissel from Airbourne said.

Bischof said around 70 per cent of business travellers were travelling in economy these days.

"We believe the upsale potential for economy to premium economy is far bigger than the downsell from a full-class business with a flat seat," he told a packed crowd at the ITB travel fair in Berlin.

Bischof said the airline was investing €3 billion euros in improving its product for customers, not counting the 36 billion euros worth of new aircraft it has ordered.He put the investment in the premium economy at €170 million, compared with €1 billion for the business class refurbishment.

Davy analyst Stephen Furlong said it was important for Lufthansa to invest in its product, even as it cut costs.

"They want to be the first European five-star airline. Like a lot of German companies in other industries, they will never be the lowest on costs, so you'd better have a better product than anyone else," Furlong said, referring to Lufthansa's attempts to get a five-star rating from Skytrax, which reviews and ranks airlines.

Airlines with five-star ratings include Singapore and Cathay, among others.

Lufthansa said premium economy would make up around 10 percent of seat capacity on its long-haul flights, carrying around 1.5 million passengers a year in the class.

It will be fitted on all 106 of its long-haul planes within a year.

Bischof added the group had no plans at present to introduce it on short- or medium-haul, or on other airlines within the Lufthansa group, such as Austrian Airlines.

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