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First class gets swankier, but bare-bones air travel is the future for most passengers

Key Points
  • Airlines are betting on bare-bones travel.
  • The nearly $50 billion deal includes planes for a host of international budget airlines.
  • Price is the top factor when choosing an airline, according to a recent survey.
The Airbus A320neo (New Engine Option) takes off during its first flight event in Colomiers near Toulouse, southwestern France.
Regis Duvignau | Reuters

Airlines are warring over wealthy travelers, spending millions on plush first-class cabins that look more like flying hotel rooms than seats on a commercial airliner.

But other carriers think the thriftiest travelers are worth billions.

The blockbuster deal at the Dubai Air Show was a monster order Wednesday from a private equity firm for 430 single-aisle Airbus jets. Indigo Partners signed the preliminary order, which includes planes for a host of budget airlines it's invested in, including Frontier Airlines. The order is worth nearly $50 billion at list prices, but deep discounts for an order of that size are customary.

The same day, low-cost carrier Flydubai and Boeing, inked a deal worth $27 billion for single-aisle 737 MAX planes.

No-frills air travel has grown worldwide, as passengers seek out the lowest fare in exchange for perks like food, free checked baggage and seat assignments, which used to all come with the cost of a ticket.

It's been a thorn in the side of some more traditional airlines that have been forced to compete with airlines that sometimes offer fares in the low-single digits. In response, these traditional airlines have offered their own rival bare-bones products, and tout how some passengers to pay more to avoid it.

But Indigo's deal shows the strength of budget airlines are gaining worldwide as record numbers of travelers take to the skies. Indigo has stakes in Hungary-based Wizz Air, Mexico's Volaris, and Chile's Jetsmart.

Investors have taken notice of travelers' price sensitivity.

Warren Buffett, who long shunned investments in airlines only to take a large stake in the biggest four U.S. carriers last year, recently noted travelers remain extremely price conscious, even if they are crammed in more closely-packed cabins.

Cabins "may become like cattle cars ... but a significant percentage would rather be treated that way and fly for X" than have far more legroom and have all kinds of things and travel for X plus 25 percent," he told CNBC in May.

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