Airline seats are a common complaint among flyers, but new high-density layouts could make economy seats even less comfortable. United Continental Holdings (NASDAQ:UAL), parent company of United Airlines, may be about to shrink some of its seats, following the lead of other airlines. But will the trend continue? And how will airlines benefit financially?
The Los Angeles Times reports that United Airlines is considering a 10-seat-across layout for its Boeing 777-200 order, compared to the current nine seats across. But since the Boeing 777-200 isn't getting any wider, the seats will have to get narrower.
Currently, most economy-class seats are between 17 inches and 18.5 inches wide, with seat width remaining fairly consistent among airlines but differing by type of aircraft. The Times notes that if United does opt for 10 seats across in its Boeing 777-200, the seat width could shrink from 18 inches to 17 inches.
But the trend that passengers and investors should really be looking at is how high-density layouts are becoming more common across the airline industry -- and how airlines are therefore getting more money out of each flight.
The costs to operate an aircraft vary little by number of passengers on board, since most of the flight cost comes in the form of fuel and crew. Realizing this, airlines have been putting more seats in each plane to create what they call "high density" layouts.
Besides reducing seat width, airlines have been shrinking seats in another way. Seats that are slimmer in thickness are now finding their way into planes from United, Delta Air Lines (NYSE:DAL), American Airlines Group (NASDAQ:AAL), and Southwest Airlines (NYSE:LUV). These seats have played a key role in increasing the number of seats that can be put on a plane without reducing legroom.
But there have been criticisms of slimmer seats. Some passengers have complained about reduced comfort, though airlines contend that both passengers and airlines come out ahead.
Slimmer seats are becoming more commonplace across both narrowbody and widebody aircraft, but narrower seats tend to show up on widebody aircraft such as the Boeing 777. The reason for this comes down to simple math: Adding another seat to a row requires reducing the size of existing seats by a greater percentage, to comply with federal regulations governing minimum aisle width. In aircraft with six or fewer seats across, this squeeze would be more than passengers would be willing to take.
Adding an extra seat per row to the Boeing 777 is not unique. If United goes ahead with its 10-seat-abreast configuration, it will join such other carriers as American Airlines (two of three seating layouts), Air Canada (one of three layouts), Air France-KLM (all layouts), Japan Airlines (two of eight layouts), and Alitalia (all layouts).
Using data from SeatGuru, I have found that almost all airlines with the 10-abreast configuration on the Boeing 777-200 have a seat width of 17 inches to 17.5 inches. With nine seats across currently and a seat width of 18 inches, adding a 10th seat is likely to shrink the seat width on United's Boeing 777-200 to the range of similar 10-abreast aircraft.
According to SeatGuru, British Airways, Delta Air Lines, and Turkish Airlines are among the carriers that still have the nine-abreast configuration on all aircraft. For now, that gives these seats a 17.5-inch to 18-inch width.
Benefits for airlines
Adding more seats is a key way for airlines to reduce cost per available seat mile, or CASM. If airlines can maintain fare levels, this should boost margins in this traditionally low-margin industry. Not only would these higher margins boost profits, but they would also provide a larger margin of safety in the event of a drop in demand or tougher pricing competition in the industry.
Shrinking the seats of economy passengers could have another benefit for airlines as well. With all sorts of higher-class seating options on board, economy passengers may be more willing to upgrade to better seats, bringing more revenue to the airline. Various types of upgraded economy seats have become common among major carriers, and shrinking standard economy seats could help airlines in the upsell.
For a look at how one airline is benefiting, take Air Canada. Financial Post notes that the airline has found that by adding extra seats to flights to the Caribbean, it can turn previously unprofitable routes into profitable ones. As previously mentioned, Air Canada is also one of the airlines operating the Boeing 777 with 10 seats across in a high-density layout. Management noted that additional seats is one of the key ways to meet their goal to cut costs by 15%, and has called it a "great strategy."
Since launching its high-density aircraft, Air Canada's load factor has held fairly steady, meaning that the airline is now able to sell more tickets on the same plane. Although U.S.-based carriers operate different routes, that fact that these layouts work for Air Canada is a bullish sign for U.S. carriers looking to adopt them. An important area to watch here is whether these layouts can become a U.S. industry standard. If they do, airlines stand to benefit as their competition will not be offering a layout that makes their own appear less comfortable by comparison.
United is seeing the benefits from slimmer seats, now installed in 300 of its aircraft, as the airline is able to add capacity without materially changing costs. In its most recent conference call, United's chief revenue officer noted that when the slim seat installations are finished at the end of 2015, it will be like adding 14 new aircraft to the fleet.
With no plans to lower fares, United could effectively add 14 additional aircrafts' worth of seats with little additional costs to itself.
What to watch for
Several airlines already operate the Boeing 777 with 10 seats across, and many others have been installing slimmer seats on their planes. In the short term, fliers and investors should look to see whether United does configure its Boeing 777 with 10 seats across: This move could also encourage Delta Air Lines to add the extra seat per row, making the high-density 777 layout the U.S. airline standard, which will likely boost revenue per flight.
Longer-term, it's worth watching how far the increased density trend will go. Narrower seats on widebody aircraft and slimmer seats on all types of aircraft are areas to watch for, but it's always worth keeping an eye on what new ideas airlines may bring to the skies.
Alexander MacLennan owns shares of Air Canada, American Airlines Group and Delta Air Lines, and has the following options: long January 2017 $25 calls on American Airlines Group and long January 2016 $60 calls on American Airlines Group. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.