Updated March 4, 2014 6:12 p.m. ET
FRANKFURT—For fliers, the ideal seat is usually in first or business class. For airlines, the sweet spot on long-haul flights is, increasingly, farther back in the plane.
A new hybrid class, called premium economy, is appearing on more planes due into its attractive economics. The seats generally give passengers a bit more space than traditional coach and often come with extra amenities like better food. Tickets are pricier than for basic economy, but still much cheaper than flying up front.
For carriers, the whole package costs much less than business class. That means they only need to spend a bit extra to generate higher fares than tourist class and can still pack in seats. Airline executives say it can be the most profitable cabin.
The favorable equation is part of what prompted Deutsche Lufthansa AG LHA.XE +2.02% Deutsche Lufthansa AG Germany: Xetra €18.43 +0.36 +2.02% March 4, 2014 5:35 pm Volume : 3.34M P/E Ratio 11.10 Market Cap €8.33 Billion Dividend Yield 1.36% Rev. per Employee €257,206 03/04/14 New Roche Chairman Plans No Bi... 03/03/14 Roche Looks to Buy as Its Cash... 03/03/14 Etihad Airways Seeks Access to... More quote details and news » LHA.XE in 
Your Value Your Change Short position to start rolling out a new premium economy section on all intercontinental flights as of this coming October. "It will be a very profitable product," said Jens Bischof, Lufthansa's chief commercial officer.
Airlines, like passengers, fret about space. Fliers want as much elbow and knee room as possible, while carriers want to make optimal use of each square foot. Lufthansa's new seat gives passengers up to seven extra inches to stretch their legs, and four more inches at shoulder-height because each row has two fewer seats than in traditional economy class. There are no shared arm rests.
Lufthansa's new seat takes up about 50% more floorspace than a traditional economy seat. The incremental cost of other extras, such as one additional checked bag, meals served on china tableware and an amenity kit, is proportionally less, Mr. Bischof said.
A round-trip premium economy ticket will average €600 ($824) more than basic economy. Lufthansa doesn't disclose average economy-class fares.
Business-class seats, meanwhile, use three times the area of standard economy seats and round-trip fares are €2,000 higher on average, Mr. Bischof said.
Travel website TripAdvisor Inc. TRIP +6.31% TripAdvisor Inc. U.S.: Nasdaq $106.89 +6.34 +6.31% March 4, 2014 4:00 pm Volume (Delayed 15m) : 2.54M AFTER HOURS $107.08 +0.19 +0.18% March 4, 2014 7:56 pm Volume (Delayed 15m): 113,051 P/E Ratio 74.23 Market Cap $14.30 Billion Dividend Yield N/A Rev. per Employee $468,350 02/12/14 Dow Snaps Four-Day Win Streak 02/11/14 TripAdvisor Reports Jump in Re... 12/12/13 Google's Hopes of EU Settlemen... More quote details and news » TRIP in Your Value Your Change Short position estimates premium economy fares range from double to four times the lowest economy fare, while business fares can reach 10 times the cheapest fare. Andrew M. Wong, regional director of TripAdvisor Flights in Singapore, said premium economy is "a good compromise" for business fliers whose travel policies don't allow business class.
Boeing Co. BA +1.57% Boeing Co. U.S.: NYSE $130.23 +2.01 +1.57% March 4, 2014 4:00 pm Volume (Delayed 15m) : 5.40M AFTER HOURS $130.14 -0.09 -0.07% March 4, 2014 7:54 pm Volume (Delayed 15m): 20,693 P/E Ratio 21.58 Market Cap $95.32 Billion Dividend Yield 2.24% Rev. per Employee $514,388 03/04/14 Pentagon Eyes Boost for Aircra... 03/04/14 As Pentagon Budget Shrinks, Sp... 03/02/14 FAA Seeks New Safeguards on Bo... More quote details and news » BA in Your Value Your Change Short position now delivers more than 30% of its top-selling 777 intercontinental planes with premium economy seating, and the proportion is rising, said Kent Craver, a director of cabin experience and revenue analysis at Boeing. Ten years ago, no new 777s had the seating.
Even more old planes are being updated with premium economy, although the total isn't tracked. Lufthansa, for example, plans to install the cabin by late next year on 106 long-haul planes, most already in its fleet.
"There definitely has been a significant uptick in the installation and interest in premium economy," said Mr. Craver. "It's one of the hottest topics we discuss with airlines."
Excitement built slowly, though. Virgin Atlantic Airways Ltd. introduced the first enhanced economy section in 1992, "aimed at the cost-conscious business traveler," said a Virgin spokeswoman. Almost a decade later, rivals including British Airways, now a unit of International Consolidated Airlines Group SA, IAG.LN +4.04% International Consolidated Airlines Group S.A. U.K.: London GBp439.90 +17.10 +4.04% March 4, 2014 4:35 pm Volume : 7.24M P/E Ratio N/A Market Cap GBp8.59 Billion Dividend Yield N/A Rev. per Employee GBp266,251 03/04/14 Why This Plane Seat Is the Mos... 01/28/14 EU Air-Traffic Controllers Pla... 01/23/14 Spanish Airlines Can Charge fo... More quote details and news » IAG.LN in Your Value Your Change Short position copied the concept.
By 2009, about a dozen airlines offered special economy service and today almost twice as many do, said Chris Emerson, senior vice president of marketing at Airbus Group EADSY +2.60% Airbus Group N.V. ADS U.S.: OTC $18.16 +0.46 +2.60% March 4, 2014 3:57 pm Volume (Delayed 15m) : 338,133 AFTER HOURS $18.17 +0.01 +0.06% March 4, 2014 7:59 pm Volume (Delayed 15m): P/E Ratio 29.22 Market Cap $55.78 Billion Dividend Yield N/A Rev. per Employee $553,841 02/27/14 Air Lease Warns on Asian Jet B... 02/06/14 GM's Profit Hit by Global Chal... 01/14/14 Japan Airlines Reports Malfunc... More quote details and news » EADSY in Your Value Your Change Short position NV. "Flights are fuller than ever, so there's a renewed interest in capturing high-fare traffic," Mr. Emerson said.
Lufthansa's new seat gives passengers up to seven extra inches to stretch their legs. Bloomberg News
Products vary widely, though. U.S. carriers and several others only give some extra leg room and use basic economy seats. Perry Cantarutti, a senior vice president at Delta Air Lines Inc., DAL +5.71% Delta Air Lines Inc. U.S.: NYSE $34.45 +1.86 +5.71% March 4, 2014 4:01 pm Volume (Delayed 15m) : 13.18M AFTER HOURS $34.60 +0.15 +0.44% March 4, 2014 7:57 pm Volume (Delayed 15m): P/E Ratio 2.77 Market Cap $27.68 Billion Dividend Yield 0.70% Rev. per Employee $484,059 03/03/14 Stocks Fall on Ukraine Unrest 02/18/14 AHEAD OF THE TAPE: Spirit Airl... 02/12/14 Atlas Air Sees Slide in Pentag... More quote details and news » DAL in Your Value Your Change Short position said the layout works well for the carrier's network and "space is what customers say is the primary benefit." At the other extreme, Air New Zealand Ltd. AIR.NZ +1.93% Air New Zealand Ltd. New Zealand: NZX $1.85 +0.04 +1.93% March 5, 2014 4:28 pm Volume : 5.92M P/E Ratio 9.20 Market Cap $1.98 Billion Dividend Yield 5.72% Rev. per Employee $443,015 02/27/14 For Air New Zealand, It Pays t... 02/25/14 Qantas Comes Under Pressure as... 02/06/14 Virgin Australia Contends With... More quote details and news » AIR.NZ in Your Value Your Change Short position offers seats that can become beds.
"It really is all over the board," said Mr. Craver at Boeing.
The trend has gathered speed due to widening differences between the front and back of international airliners. Over the past 15 years, most global carriers have upgraded their business cabins with seats that spread out into flat beds. These are so luxurious that most airlines have ditched first class.
To make room for these loungers, airlines have squeezed coach class. First they compressed rows by shaving knee space. Now many are wedging an extra seat into each row, although Lufthansa has no plans to do that, Mr. Bischof said.
The German carrier considered introducing premium economy twice before and its hesitation shows the cabin's potential downside. Airlines want economy fliers to buy pricier seats, rather than business travelers opting for cheaper ones. Only after Lufthansa in 2012 began upgrading its business class to horizontal beds from slanted ones was it confident of not cannibalizing its own premium traffic.
"You ask yourself, isn't there a down-sell risk," said Mr. Bischof. "I see the up-sell potential as significantly higher."
Mr. Craver at Boeing said premium economy's rise mirrors the emergence of business class in the 1980s. Then, the gap between coach and first was wide. Today, business class seats are cushier than first-class seats a generation ago.
Now airlines are coming full-circle to three-class configurations again, Mr. Craver said. "Premium economy is kind of the new business class."
Write to Daniel Michaels at daniel.michaels@wsj.com
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