Delta pushes product segmentation, punts on Basic Business for now

Market segmentation is all the rage at airlines these days, part of meeting customers where they are with the perfect offer that gets them to purchase a ticket. But can it go too far? How many different versions of an economy class ticket can one airline really need?

At its investor day event a couple weeks ago Delta Air Lines did not announce its highly anticipated Basic Business class offering. But airline president Glen Hauenstein was clear that even within the existing four classes of service (five if one counts basic economy separately) there is potential for further segmentation. “We’ve got all these different cabins on the airplane, but we really think that there’s another way to segment them,” Hauenstein explained.

“I’m going to say, first of all, we’re experimenting with this; I’m not announcing anything today,” he continued. “But if you said that within each one of these categories, there are people who have different needs, and you had a good product, a better product and a best product, could we invent subcategories of each one of these products that had more value?”

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Ancillary bundles, with a common hard product

Hauenstein also shared that the carrier will begin that second dimension of segmentation at the back of the cabin, not the front. Delta prizes its premium revenue and is justifiably hesitant to do anything that might disrupt the golden goose, though changes there are expected in the 2026 timeframe.

In the main cabin Hauenstein implies that basic economy tickets fulfill the “good” classification, while regular coach seats are the “better” option. The carrier does not, however, have a “best” option in that portion of the plane.

Moving slightly forward in the cabin, Hauenstein expects the Comfort Plus cabin to grow both physically and in terms of ancillary options on board. “We thought, ‘Well, Comfort Plus, there’s no good better best there, could we start introducing that?’ And I think over the next couple years, you’ll see us attempting and really testing with what consumers want in their bundles and what they’re willing to pay for.”

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Separately in his comments Hauenstein shared that he does not necessarily expect the on-board seat to be physically different for each of the tiers within a cabin. Instead, he sees Delta “taking each one of these physical [offerings] and then putting on additional attributes to say, ‘I know if I pay more, I get more.'”

What might that more be?

Ultimately, Hauenstein wants to shift the booking experience for the passengers who book closer to departure, pay more, and who are “generally getting the leftover inventory.” Creating a “better value proposition for our customers, where if you’re paying more, you feel like you’re getting more,” is the goal.

Read more: Delta teases “Basic Business” in push for revenue boost

For economy class passengers perhaps the “Best” option would include a free drink or snack on board. Airlines have had versions of this, either for full fare passengers (Southwest Airlines with its Business Select fares) or top elites (other legacy carriers) for some time, so the infrastructure to deliver the benefit is not too challenging. That said, those benefits are also harder to put a significant price tag on, enough for passengers to feel good about having spent the extra money. Brian Sumers suggested a shift in change fee structure could be an option, though taking that back away from all US-originating, non-Basic fares could be a tough move, especially as even the U/LCCs have gotten in the game these days.

Moving forward in the plane, perhaps the “Best” Premium Select fares could include lounge access while the “Good” Delta One fares could lose that benefit. Similarly, advance seat assignment in the premium cabins could only be included in the higher tiers of those fares, an approach that has been around for some time across different airlines.

Shifting cabin configurations

Delta has been moving towards a more premium configuration across its fleet for some years. That effort is expected to accelerate in the years ahead.

The carrier’s A350-900s started to add premium seats a year ago. That work will spread to the rest of the A359s over the next couple years. Similarly, the A350-1000s will be delivered from 2026 with more total premium seats (C+, Premium Select, Delta One) on board than main cabin.

We have enough data to suggest that, yes, we do have airplanes that need more premium seating. And so we’ve started reconfigurations. – Glen Hauenstein, President, Delta Air Lines

In addition to the different bundling described above, Delta expects to expand the number of C+ seats for sale within its existing fleet. On the widebody retrofits that will come with a slight decrease in total aircraft capacity. On the single-aisle planes, however, the C+ growth is expected to be handled without changing the total number of seats on board. Reading between the lines, that translates to the same increased space on board for those in C+, but likely less space for main cabin passengers, as the total seat count will not change. And, thanks to AI-driven pricing solutions, passengers can expect to pay more for all these seats in the years ahead.

Topping out with WheelsUp

Beyond the Delta planes, one of the analysts asked about the WheelsUp private jet program. Delta CEO Ed Bastian spoke to that, noting “We’ve got some work to do, but eventually it’s going to be our next step on our premium ladder.”

Bastian suggested that no airline has successfully blended commercial aviation with private jet service, though Qatar Airways also has a private jet arm. Lufthansa closed its private jet operations in 2022 after 15 years. He’s ready to change that storyline, however, with Delta employees on loan to WheelsUp, “learning about the business and how we can schedule it, how we can price it, how we can operationalize it.”

He continued, “While the while the market is different and the customer base is a little different, it is also something that’s easy to get your arms around. In the next couple of years, I think you’re going to see that asset grow meaningfully, and I think you’re going to see a lot of value that we create, not just for our business, but potentially as owners.”

And, eventually, he aims to get regular DeltaOne passengers to occasionally tip over into the private jet experience.