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In a confidential test lab in a remote office park near the Frankfurt airport, a small Lufthansa team holed up for five years, refining one of the German airline’s most closely guarded secrets. They called it the V concept.

The V-concept seat — 6 feet, 6 inches long and almost 2 feet wide — is the German carrier’s latest weapon in the fierce competition among global airlines. It is designed to withstand shocks 16 times the force of gravity and comes with a cozy padded footrest. It is a new business-class seat, and if you are traveling round trip from Frankfurt, Germany, to New York, it can be yours for about $5,000.

“Business class is where competition really is serious,” says Björn Bosler, the airline’s manager for passenger-experience design, business and premium, who led Lufthansa’s team of dozens of seat designers and engineers. Bob Lange, senior vice president, head of market and product strategy at Airbus, the European plane maker, agrees: “There’s an arms race going on among carriers.”

Billions are being spent on research and development, architects, industrial designers and even yacht designers to pack seats with engineering innovations and fancy features. Just fabricating a single business-class seat can cost up to $80,000; custom-made first-class models run $250,000 to $500,000.

Those who fly coach may have had a glimpse of these expenditures as they shuffled past the elaborate reclining, angled, semiprivate accommodations in business and first class on their way to the knee-scraping spaces and overstuffed overhead compartments in the main cabin. Travelers in business and first class may represent 10 to 15 percent of long-haul seats globally, but they account for up to half of the revenue of airlines such as Lufthansa or British Airways, says Samuel Engel, a vice president at ICF SH&E, an aviation-consulting firm.

There is only so much space inside a plane. As the more lucrative seats expand, the coach section often contracts, with more seats jammed into the same cabin space and more discomfort for coach passengers.

“The seat is one of the few elements that an airline can actually make its own,” says Patricia Bastard, an architect and designer who has worked with Air France on its first-class cabin. “There’s customer service, of course. Maybe there’s a bar. But seats are unique to the airline.”

Lufthansa, Europe’s largest airline and the world’s fourth largest in terms of passengers, is investing $4 billion to improve its cabins, offer satellite-based Internet and upgrade its onboard entertainment system. But the new business-class seat, which first appeared last year on the company’s new Boeing 747-8 planes, is perhaps the boldest attempt to lure the high-value passenger. The seat research, design, manufacture and installation account for roughly a third of that $4 billion investment, says Bosler, more than $1 billion dollars. Eleven planes are outfitted with the new seats, and Lufthansa is expected to install about 7,000 on 100 widebody airplanes by 2015.

Lufthansa’s task — like that of all the big airlines — was to create a special environment for those big-spending travelers within the inflexible boundaries of an aircraft fuselage. “The challenge was finding a solution that provides all customer benefits but also tries to save as much space as possible and get as many passengers on board as possible,” Bosler says.

Design innovations

The growth in business travel has spurred considerable innovation in the front of the plane. But finding the right balance among space, comfort and seat features is tricky. Until about five years ago, the norm was for business seats to provide a lie-flat surface at an angle, what was called a “faux flat,” says Mark Hiller, chief executive of Recaro Aircraft Seating, based in Germany, one of three large seat manufacturers. But frequent fliers complained that they slid down their seats during the flight.

Now airlines are increasingly trying to fit fully flat beds for business class. But flat seats require more space, which typically means losing about 10 percent of the business-class seats. British Airways, struggling with trying to fit a 73-inch bed inside the 46 inches separating two seats, came up with a design in which half its passengers sit backward, says Peter Cooke, the airline’s design manager. He calls it “the yin-yang configuration,” and it can pack 56 business seats in seven rows aboard some Boeing 777s by fitting the broader part of passengers’ anatomy (their shoulders) with the narrowest part of their neighbors’ (their feet). “By far,” he says, “it’s the most space-efficient configuration.”

The downside is a basic disruption in the traditional seating arrangement aboard a plane. Travelers face each other, risking awkward eye contact. Cooke says passengers have become used to this quirk — they accept it on trains — and don’t mind flying backward.

Other formations include a design known as the herringbone, which is used by Virgin Atlantic. Seats are staggered diagonally, allowing tighter spacing between the seats. But it means sleeping passengers’ feet stick out in the aisles.

The latest trend is higher-density seating, now used on Emirates, Swiss and Delta, with slightly shorter beds and narrower seats. The trick is that when a seat opens up into a bed, it slides under the armrest of the passenger in front.

“It’s a very demanding environment,” says James Park, a designer based in London who has worked with Singapore Airlines and Cathay Pacific. “A business-class seat has to be a working desk, an entertainment center, a dining facility and it’s also a bed.”

Few of these innovations have occurred on U.S. carriers, which have been locked in a scramble for survival during the past decade. Their business model has amounted to jamming as many people as possible on planes with little money to spare on new designs.

That is starting to change. Delta, United Airlines and American Airlines have outlined large investments to install new business-class seats, for international flights and transcontinental legs — from New York to Los Angeles or San Francisco.

“Only a few years ago, all domestic carriers were chasing the commoditization of the business,” says Glen Hauenstein, Delta Air Lines’ executive vice president for network planning, revenue management and marketing. “That didn’t work. It was a spiral to the bottom.”

Delta, for instance, plans to overhaul its entire long-range fleet by next summer, rolling out a new business-class seat on international flights. The company does not have a first-class cabin, focusing instead on business and coach. “We cater to corporate clients,” Hauenstein says. “That’s our sweet spot. … American corporations are cost-conscious. … And we don’t have a lot of oil sheiks or Russian billionaires.”

R&D at Lufthansa

In 2007, after reviewing the available business-class seats on the market, Lufthansa decided to design its own. It hired a design firm, PearsonLloyd, a furniture specialist based in London that had developed a first-class seat for Virgin Atlantic.

In 2010, halfway through the development program, Lufthansa tested the seat with passengers on a real flight. The seats were in a secret compartment on the airline’s Frankfurt-to-New York daily flight. Over two months, 1,340 passengers tried them. Their comments led to more tweaks: designers added a small separation on a common tray between each pair of seats, so passengers’ drinks wouldn’t touch.

“All airlines are different. Their clients are different. The body types sometimes are different,” says Luke Pearson, a designer based in London who designed the seat with Lufthansa. The typical Lufthansa business-class passenger is a man in his mid-40s who travels for business every other month. Germans and Americans account for half of Lufthansa’s business passengers.

Paying for privilege

Passengers still pick airlines based on the availability of flights and schedule, says Lange of Airbus, a former vice president for marketing there. “But the cabin product is now right behind that.”

This is especially true when it comes to business-class clients. “The business case for airlines to renew their business class,” he says, “is driven by their calculus to gain market share.”

Generally speaking, a first-class seat takes up the space of six to eight coach seats and a business-class seat takes up about four coach seats. The same is roughly true for ticket prices: first class is generally more than twice the price of business; business class is usually four times the price of coach.

Hauenstein of Delta explains that even with fewer seats in its business-class cabin, an airline can make more money. On its Boeing 747-400s, for instance, Delta went from about 65 cradlelike business seats to 48 flat-bed seats. Yet while the total count dropped, Hauenstein says the switch to better seats increased the profitability of its fleet.

The reason lies in a dark science perfected by airlines years ago, known as revenue management. On any given flight, airlines generally try to maximize their profits by selling similar seats at different prices. The basic insight, which American Airlines figured out before others, was that you could make more money selling 100 seats at 100 different fares than offering every seat at the same price.

In business class, there are typically four buckets of prices, ranging from $2,000, for tickets bought far ahead of time, to $6,000 for last-minute walk-ins. If the seat experience is more pleasant, the airline can charge a premium. Delta decided it could sell more of the more expensive fares, and fewer of the less-expensive ones, since business passengers often buy tickets close to the flight date.

“The old cabin was rarely full,” Hauenstein says. “But if demand exceeds supply, that’s a good way to make money.”

There’s a saying in the airline business that seats are perishable items. If they go unsold on one flight, they cannot be sold anymore. Likewise, the seat has a limited life, which airlines and designers say is about seven years. And so, by the time Lufthansa is done installing all its new seats throughout the fleet, the airline will have to look for a replacement.

“We’ve already started thinking about a new seat,” says Bosler. Maybe this one will come with a cup holder.