Seat 2B By Joe Brancatelli
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All-Business-Class Returns, Profit Still Missing
April 2, 2015 --They're ba-a-a-ck! All-business-class flights are making a modest return to the frequent flier arena.
After several spectacular and spectacularly interesting flameouts a decade ago, the concept of taking a commercial aircraft, pimping it out with only business seats and throwing it into a market full of comfort-seeking international frequent fliers is having a ghostly renaissance. Yet as much as business travelers love the idea of having commodious, semi-private flights on important overseas routes, there's still no proof of a financial future.
The most significant new all-business-class candidate to appear lately is La Compagnie, a French start-up that intends to fly between New Jersey's Newark Airport, which serves the huge Metropolitan New York market, and Luton Airport about 30 miles from Central London. Nonstops flights are scheduled to launch on April 24. Initial plans call for four roundtrips a week using Boeing 757s outfitted with 74 seats that fold into beds.
La Compagnie announced the route in February with an eye-popping introductory fare of just $1,007 roundtrip. Ongoing prices seem to have settled in at around $1,900 roundtrip, about 65 percent below the going rate charged by the existing U.S. and U.K. carriers.
Although it's new on the all-important NyLon route, La Compagnie (French for "The Company") broke into the skies last July with all-business-class flights between New York and Paris, the second-busiest transatlantic route. It has something of a corporate pedigree, too, since its chief executive and founder, Frantz Yvelin, helped create L'Avion, an all-business-class carrier eventually purchased by British Airways subsidiary OpenSkies. Most of La Compagnie's other executives also come from the ranks of L'Avion and OpenSkies.
La Compagnie "offers an affordable business class product, a step up from premium economy," says deputy chief executive and co-founder Peter Luethi, who spent most of his airline career at Swissair. "We are not the best business class in the skies. We're the best-priced business class in the skies."
The balancing act at La Compagnie is desperately needed because it's historically risky to play with aircraft "real estate." The Boeing 757-200s La Compagnie flies can accommodate as many as 228 passengers in an all-coach configuration, but the carrier's 74 berths is a notably "denser" arrangement than the 48 seats that EOS Airlines tried in 2005. La Compagnie's seats transform into what the industry calls "angled flat" beds, a space-saving compromise that isn't as popular with premium-class passengers as "fully flat" seatbeds that take up more space.
La Compagnie's in-flight meals are less elaborate than other business class food and beverage services. In-flight entertainment is presented on tablets, a less costly, less comprehensive alternative to the latest in-seat systems kitted out with thousands of movies, television programs and musical selections. Luton Airport has advantages — it's easier to navigate and less chaotic than London's Heathrow Airport — but onward flight connections are poor and ground-transit options to the British capital are sub-optimal. And, of course, there's La Compagnie's flyspeck fleet (just two aircraft as of February) and miniscule schedule. When it launches later this month, it will operate a total of eight flights a week between Newark and Luton. British Airways flies more than that each way every day between New York and London.
"We're not going after the big, corporate customers who have contracts with the major carriers flying to London or Paris," says Luethi. "The independent customer is our sweet spot. And there is a rainbow of them: entrepreneurs, small companies, leisure travelers who want a better experience. We're the airline for the ones who count the money, but still want to fly comfortably."
Luethi is coy on profit targets — "What airline is profitable in the first year?" he asks — but the financial viability of all-business-class service remains elusive. Consider one of La Compagnie's competitors, none other than the aforementioned giant British Airways.
On most days, BA operates two all-business-class roundtrips between New York's Kennedy Airport and London City Airport, a favorite of executives who work in London's resurgent Docklands district. BA's lavishly appointed, specially configured Airbus A318s have just 32 fully flat beds and a raft of luxurious amenities that appeal to the business elite: pre-flight dining in private airport lounges; elegant in-flight meals and wines; in-flight Internet access; fast-track security clearance; and the ability to check in for New York-bound flights as little as 15 minutes before departure.
The Kennedy-London City all-business-class runs carry a hefty price tag to match the service. Midweek roundtrips next week cost from $7,300 to about $11,000, according to the British Airways website.
But profits? When they launched in 2009, BA's then-chief executive Willie Walsh said he expected New York-London City flights to turn a profit in about a year. Six years later, however, BA stresses the service's popularity, not whether it actually makes money.
"We don't talk about profits," Simon Brooks, BA's senior vice president of North American sales, told me a few weeks ago. "What I can say is that our corporate financial travelers love it. It's as close to a private jet service as you can get commercially. It hits all the key points: convenience, comfort and extraordinary levels of privacy and personal service."
Given the continued lack of financial payoffs, La Compagnie's flights and even BA's London City runs could be judged an anomoly, a provincial quirk that matters little outside the privileged triangle between New York, London and Paris.
The same way you explain the transatlantic triangle runs with all-business class service: The chance to court premium-class business travelers and the possibility of a profit.
The SAS Houston-Stavanger route isn't as peculiar as it sounds. Stavanger is the center of Norway's North Seas oil industry and Houston is an American oil capital with an airport hub run by United Airlines, Scandinavian's Star Alliance partner. The service — 44 seats on a Boeing 737-700 — has been running six times a week since last August. And the price — sale fares as low as $3,200 roundtrip — won't break the piggy bank of an oil tycoon on either side of the Atlantic.
The all-business-class run between London Heathrow and Doha, which Qatar launched last May with 40-seat Airbus 319s, is a slightly different case. Given the argument over alleged subsidies of the Gulf carriers, you could claim that it's just another example of Qatar Airways flooding the zone thanks to an endless gush of funds.
Qatar Airways sees it differently, of course.
"This is a niche product," chief executive Akbar Al Baker recently told me through a spokesperson. "It tends to the needs of a particular type of traveler. There is a demand for this type of bespoke service."