At last, premium economy has landed. Clive Dorman reports.

Despite the proliferation of low-cost carriers around the world, with their sardine-like seating room, airlines are recognising the bankability of space. The airlines - new and old, cost-conscious and upmarket - are latching on to a phenomenon they are calling premium economy.

People hate being packed into planes. People love space. That sounds like the dumbest self-evident truth imaginable, yet for years airlines have been ignoring the findings of customer surveys showing that people, especially baby boomers and gen-Xers - travellers who fly frequently for work and pleasure - value space above almost all else on an air trip.

Bryan Grey was nearly two decades before his time in making personal space a cornerstone of his marketing on Australia's first low-cost carrier, Compass (Mk I), in 1990-91.

His standard economy seat-row space of 86 centimetres between the back of one seat and the seat in front (10 centimetres more than Jetstar, 7.5 more than Qantas and 5 more than Virgin Blue) has never been bettered in the Australian skies, although Air New Zealand equalled it a few years ago with its standard international economy class.

Air NZ was the first local carrier to adopt international premium economy, which has 96.5 to 101.5 centimetres of seat-row space on its long-haul routes to Asia, the US and Europe.

It turned out to be such a hit that Air NZ has renewed its commitment to the concept as it introduces a new fleet of Boeing 777s that will take over from its venerable 747 jumbos on the longest routes.

An even bigger compliment is that Qantas has watched the success of Air NZ's premium economy product and has decided to copy it on international routes.

However, an entirely different premium economy is about to take off here: a budget business class designed purely to help Virgin Blue lure corporate travellers away from Qantas.

Virgin's premium economy, 84 to 89 cm for each seat row, about the same as Bryan Grey's economy, will be launched next April at a rate unimaginable to backpackers and bargain-hunters: something approaching $1000 return on the benchmark Melbourne-Sydney route. That compares with Virgin Blue's Corporate Plus flexible economy rate of $339 one way and Qantas's full economy of $412 one way (79 cm) and business class of $613 one way (94 to 96 cm).

It's all part of Virgin Blue boss Brett Godfrey's strategy to "pinch and pilfer" business travellers from Qantas as Qantas's corporate travel contracts with big business expire. With an eye particularly on the Federal Government's annual $320 million travel bill, Godfrey wants to triple his share from $30 million to $100 million.