Can a stand-alone all-business-class “boutique” airline make it as a private-jet alternative? With the failure of transatlantic carriers MAXjet in December and Eos in April, some are questioning the possibility of success for the business model.
MAXjet launched its “all-premium” airline in November 2005 with New York-London and Las Vegas-Los Angeles service. It had ceased operations by Christmas Eve 2007. Competitor Eos began service a month earlier and lasted four months longer, filing for bankruptcy and shutting its doors on April 27, 2008.
That leaves the transatlantic all-business-class market to British carrier Silverjet, with London-New York and London- Dubai flights; and French operator L’Avion, with a scheduled Paris-New York service.
According to CEO Lawrence Hunt, Silverjet posted a 67-percent load factor in April, taking 10,595 revenue-seat bookings out of an available 15,900. He also noted that the London-Dubai route is showing a 70-percent load factor, good news in a business where the break-even point is a 65-percent load factor.
Hunt is particularly enthusiastic about the London-Dubai service, launched six months ago. In the past year, he noted, airlines have recorded a 20-percent jump in travel between the two cities, which he said represents an increase of about 600,000 passengers. “It is rapidly catching up with London-New York and in a few years might be the busiest route in the world.” In fact, he added, Silverjet is considering Dubai as a hub to support additional routes, possibly Dubai-Johannesburg or Dubai-Delhi.
In terms of other destinations, he said Silverjet is also considering San Francisco and Los Angeles. But in the more immediate future it is adding airplanes to the existing fleet of three Boeing 767-400s, allowing greater scheduling frequency.
At this point, said Hunt, Silverjet plans to slow its growth and digest what it
has bitten off so far. A recent $100 million pledge of additional funding from a United Arab Emirates investor is likely to ease any heartburn. It is expected to come in the form of an initial $25 million boost, plus another $75 million earmarked for the development of new destinations. In return for the equity, the investor will receive a 28-percent stake in the airline and will appoint two representatives to the Silverjet board of directors.
Silverjet initially focused on the leisure traveler, a passenger who typically travels on weekends and during the holiday season. At the same time, the company also paid particular attention to executive travelers in such fields as music, technology, niche financial services and entertainment, who now account for about 50 percent of Silverjet’s business. With those markets relatively well established, the airline has begun a push to increase its share of major corporation travel.
The airline has also carefully raised its fares by about 20 percent since its launch, taking into consideration cost increases, in particular the price of fuel.
Paris-New York Appears Successful for L’Avion
L’Avion, the Paris-based all-business-class service, was launched in January last year with a 90-seat Boeing 757 flying between Orly International Airport and Newark Liberty International.
The airline recently added a second 757 to the daily schedule and, according to CEO Marc Rochet, its financial situation is “sound,” with load factors ranging from 70 to 80 percent. In the first quarter of this year, L’Avion carried “more than 13,000 people,” equivalent to a 71-percent load factor. Booked in advance, the low-end, round-trip fare is approximately $1,500.
L’Avion is a subsidiary of Elisair, which last fall raised funds to double its capital, to $75 million. The primary shareholders in L’Avion are private-equity funds.
L’Avion has not yet released official financial results, and the fuel burn of its older Boeing 757s will likely take a toll on the bottom line. What’s more, OpenSkies, a subsidiary of British Airways, reportedly has plans to launch a modified three-class service–business, premium-economy and economy–from Paris Orly to New York this month.
A Canadian Operator Joins the Market
While Silverjet and L’Avion forge ahead, other operators either have immediate plans to enter the all-business-class market or have been floating trial balloons.
Corporate Jet Air, a subsidiary of Calgary-based charter operator Corpac Canada, expects to launch its Calgary-Toronto all-business-class service in August.
According to a spokeswoman, there will be a per-seat fixed price of $1,500. The company expects to focus on the corporate traveler in the form of individual pre-sold tickets and corporate packages. Calgary-Toronto service is “phase one” of the business plan and additional routes and U.S. destinations might be added.
Perhaps the most ambitious all-business-class launch is one being considered by Singapore Airlines, which would reportedly fly between Singapore and New York using a re-configured Boeing 777.
If a Singapore launch goes forward, the product will likely resemble the original model created by Lufthansa German Airlines when it began an all-business-class service in 2002. The idea was to retain those highly prized business class customers who were being lured away by the private jet industry. Flights began between Dusseldorf, Germany, and New York, carrying 48 passengers in a Boeing Business Jet. The idea caught on and was copied by Swiss International Airlines and KLM Royal Dutch Airlines, and all three are apparently successful.
Lufthansa operates a regular service between New York and Frankfurt with a BBJ, as well as scheduled flights on an Airbus A319LR between Munich and Dubai and between Frankfurt and Pune, India. Swiss International has a regular Zurich-New York BBJ run. KLM offers flights between Amsterdam and Houston.
Unlike the standalone all-business-class operators, Lufthansa, Swiss and KLM are all supported by agreements with PrivatAir. Under a wet-lease agreement, the Switzerland-based charter operator provides the aircraft, crews, maintenance and insurance, leaving the carriers free to focus on selling seats.