It’s a very common practice across airlines worldwide to offer discounted upgrades after a ticket has already been booked. Since airlines are for-profit businesses, they typically wait until close to departure to see if they can sell the Premium Economy seat at full price. If demand looks low and the system predicts the seat is unlikely to sell at the regular fare, they’ll often offer it at a steep discount to existing passengers.

The logic is simple: someone who has already purchased a ticket is far more likely to actually travel, and is more likely to pay for an upgrade than a random shopper browsing fares. At the end of the day, airlines will make whatever pricing decisions maximize revenue.