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New transatlantic business-class airlines

Travelers here in the U.S. have become accustomed to seeing lots of low-cost airlines on major routes, as have travelers in Canada, Europe, and Asia. So far, however, we’ve seen virtually no similar airline developments on long-haul intercontinental routes. A reader asks why: “In your recent column, you note that international routes, too, will see new low-cost competition this year. But you don’t explain this any further. Which low-cost airlines will be entering which routes?”

Two startup transatlantic lines are about to start flying. But instead of offering rock-bottom economy rates, both plan to undercut the giant lines’ business-class fares.

Low-cost business class: Two takes

Two new low-cost business-class airlines have announced plans to start flying from New York to London this fall, but with very different business models:

  • Eos, which plans to start flying on October 18, is shooting for the top business- and first-class market niche. It will fly 757s with only 48 seats, compared with the usual 180-200 on most lines. Everything about the trip, says Eos, will be superior to business class on the giant lines: lie-flat seats with the sort of privacy “suite” that a few lines offer only in first class, lavish cabin service, and all the rest. The round-trip fare of $6,500 is pegged at some $2,000 less than the giant lines’ unrestricted business class fares, but if you book by October 16, you can buy a ticket for “only” $5,000. For more information, visit Eos’ website.
  • MaxJet, which plans a November 1 start, is targeting a more cost-conscious market: travelers who want to enjoy the comforts of business class at prices only slightly higher than full-fare economy. Fares will start at $1,558 round-trip, increasing in several steps to $3,958 as lower-fare seats sell out and the reservations list fills. MaxJet will start service using a 767 with 102 seats, compared with a normal total up to 250. Seats are six-abreast (2-2-2) with no middles, and rows are spaced at 60-inch intervals—enough to stretch out pretty well but not to lie flat. Later, the line will add 72-seat 757s. Overall, the product will be about par for the course in international business class—at sharply lower fares. For more information, visit MaxJet’s website.

Both lines will start with one daily round-trip (six flights per week on MaxJet, seven on Eos); both will fly between New York’s JFK and London’s Stansted; both plan similar dinner-hour departures from JFK and mid-morning departures from Stansted. Both lines also plan to add second daily New York-London flights next year.

As far as I can tell, Eos has no plans to offer any product for economy-minded travelers. MaxJet, on the other hand, was originally conceived to offer low-cost economy tickets as well as business class. I don’t have any inside information as to why MaxJet’s managers morphed it into an all-business product, but I would expect the line to add an economy option somewhere down the line.

Why no new Lakers?

Quite a few travelers have been puzzled about why they haven’t already seen some new low-cost transatlantic services. After all, it has been almost 30 years since Sir Freddie Laker started his low-fare “Skytrain” service. Given the successes of low-fare, all-economy lines in the U.S., Canada, and Europe, isn’t it time for someone else to try low-fare transatlantic? Maybe, but there are good reasons why the low-fare formula is difficult to work on transatlantic flights:

  • The fast turnarounds that help low-cost carriers keep those costs low on short flights don’t carry over to longer flights. An airplane can do just one transatlantic round-trip per day, so an airline doesn’t gain any additional use by turning it around quickly.
  • Astronomical business class fares on the giant lines—going as high as $1.40 per mile on some routes— means that those lines can sell large numbers of economy seats at below the breakeven cost for a low-fare line. As long as the giant lines can get more than $8,000 for a round-trip from New York to London in the front of the plane, they can almost afford to give away seats in the back of the plane. And that’s tough competition for a low-fare line without the benefit of the high-roller folks in front.

Nevertheless, I wouldn’t be at all surprised to see MaxJet add some economy seats. I hope, in keeping with the line’s overall image—and gaps in the marketplace—that it decides to add premium rather than regular economy. Other lines, too, may well jump into the market. Before 9/11, for example, ATA was seriously planning to extend its low-fare service across the Atlantic.

The outlook

Will Eos and MaxJet succeed? Their products and prices certainly look attractive, but the airline graveyard is full of lines with attractive products and prices. Moreover, the newcomers’ price advantage may be illusory. Giant lines have been discounting their business-class fares for a couple of years now, so that you can often find business class round-trips from the East Coast to London for under $4,000. And you can bet that those giant lines will play hardball with fares and promotions in an attempt to drive Eos and MaxJet out of business.

Given the seasonal and weekly variations in demand, I wouldn’t be surprised to see either line experiment with promotional pricing for low-traffic flights. Even with such promotions, however, I doubt that either line will drop prices anywhere near the current economy levels.

On a personal note, I can’t conceive of the circumstances in which I would spend $6,500 for a round-trip to London on Eos—or any other line. But then I’m not on an unlimited expense account or a VP of some big corporation with deep pockets. I might well, on the other hand, shell out for a ticket on MaxJet, especially if I could deduct it as a business expense. But other travelers do not necessarily share my priorities. The final decision will come in the marketplace.

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