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American to Upgrade Business Class

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From Bloomberg News

AMR Corp.’s American Airlines said Monday that it would begin installing lie-flat, movable seats on some jets in September to win more of the most-prized travelers: business passengers flying between the U.S. and other countries.

Competition for these fliers is stepping up as U.S. airlines shift more planes to international routes, where they don’t face low-fare rivals.

American unveiled the seats at a National Business Travel Assn. conference in Chicago. UAL Corp.’s United Airlines and Delta Air Lines Inc. also have announced new or remodeled international business-class seats since March.

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Airlines expect seven to 10 times the revenue from an international business seat as from an economy seat on the same flight, said David Cush, American’s senior vice president for global sales.

American will use the new seats, which are controlled by computers and five motors and include seatback video screens, to retain customers and “go in and grab whatever passengers we can from the competition,” Cush said. The Fort Worth-based airline last upgraded its business-class seats in 1989.

“This is not just about U.S. airlines competing against each other, but being competitive on the world stage,” said John Heimlich, chief economist for the Air Transport Assn. “There you’re going up against some global heavyweights that put a lot of emphasis on product.”

U.S. airlines’ international passenger traffic will grow by 5.5% a year through 2012, compared with 3.6% forecast for domestic traffic, the Federal Aviation Administration said.

From December 2002 through May, revenue from each seat flown a mile on transatlantic and transpacific routes climbed more than 21%, compared with a 14% increase on U.S. flights, the Air Transport Assn. said.

“On the Atlantic, a good bed is very important,” said Philipp Goedeking, a Shanghai-based partner at Roland Berger Strategy Consultants who handles aviation business and is a self-described frequent flier. “The bed is substance; everything else is gimmick.”

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American’s two largest U.S. competitors are adding similar enhancements.

Atlanta-based Delta said in June that it was refurbishing business-class cabins on its Boeing 767-300s, 767-400s and 777-200s. It’s adding power outlets and upgrading headrests, tray tables and seat cushions.

United, which is based in Elk Grove, Ill., said in March that it would spend $165 million over two to three years beginning in 2007 to upgrade first- and business-class seats on international flights.

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