ANALYSIS: All-business bounces back

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Question marks have hung over the viability of all-premium long-haul services since Eos, Maxjet and Silverjet all collapsed in the latter half of last decade. But Qatar Airways’ deployment from 15 May of a 40-seat Airbus A319 on one of its six Doha-London Heathrow frequencies is a sign of renewed interest in the concept – for which the carrier’s chief executive Akbar Al Baker intriguingly suggests he has a “secret plan”.

While he acknowledges that as a member of Heathrow’s board he is “always pushing for the runway capacity to be increased and people to bring bigger airplanes”, Al Baker says in reference to the new narrowbody service: “There is a secret behind it which I would not like to tell you… I have a plan.” He adds: “You know that everybody who did this business-jet concept in a commercial way failed. So if I’m doing it and planning to fail, I must be stupid.”

Qatar Airways is not the only carrier to see potential in a business model that had fallen out of fashion. From 30 August, Scandinavia’s SAS Group is to open a new specialised transatlantic service connecting the oil centres of Stavanger, in Norway, with Houston at six-times-weekly frequency. This has some echoes of the Air France ‘Dedicate’ service – a business-class-skewed configured Airbus A319 which ran on oil routes between 2004 and 2012.

SAS will deploy a Boeing 737-700 configured with 44 business-class seats on the Stavanger-Houston link. The aircraft will be operated by Swiss business-charter specialist PrivatAir, but carry SAS Group branding. The group’s chief executive Rickard Gustafson has said the “tailored” operation is aimed at a “defined market with particular travel needs”.

There is also a new breed of start-ups targeting passengers who wish to cross the Atlantic in comfort. One is Odyssey Airlines, which intends to configure Bombardier CSeries jets with 40 lie-flat seats as it aims to start transatlantic services from London City in mid-2016. Odyssey intends to connect the UK capital’s downtown airport not just with cities in North America – such as Toronto – but also with the Middle East and other European locations too.

The airline ordered 10 CS100s in 2011 and says its 40-seat CSeries jets will be able to operate nonstop to New York from London. British Airways operates 32-seat Airbus A318s between the cities but has to refuel in Ireland on the westbound sector.

French start-up Dreamjet, meanwhile, has applied to the US Department of Transportation for permission to begin all-business class service between Paris and Newark. The Le Bourget-based carrier intends to begin nonstop scheduled service with a Boeing 757-200 in the second half of June. The new carrier will fly to Newark from the French capital’s Charles de Gaulle airport, says a source close to the approvals process.

In its DOT filing, Dreamjet says it “has plans to expand its US-Paris transatlantic flights, and possibly add flights from other European cities, in the future”.

How viable a prospect are all-premium services in 2014? Peter Morris, chief economist with Flightglobal consultancy Ascend, draws a distinction between big airlines offering all-premium among other service types and start-ups basing their business models on the concept.

“I think the distinction is really critical mass,” he says. “One of the problems I felt was the downfall of the individual operations – Eos, Maxjet and so on – was just getting that critical mass. To be blunt, no one ever got fired by booking their CEO on British Airways.”

Scale brings substitute aircraft and frequencies, and having a diversified model helps in a downturn, to which premium services are especially sensitive.

“The economics of an aircraft are all about the floor space and utilisation of the floor space,” says Morris, noting that with a 40-seat A319 “you’re basically, in a sense, losing two thirds of the floor space, and you’ve got to get that back with the premium that you charge for that service”.

He adds: “There are markets in which that kind of premium can be achieved, but is it deep enough, is it wide enough, is it regular enough all season round to be able to rely on it?”

Morris stresses his view that “when it’s got the patronage of a reasonably sized carrier – and you’d certainly put Qatar into that bracket – these things can be made to work”, but cautions. “It’s difficult to see how that one-off application of a particular niche aircraft is going to be a stepping stone to something big for the future, of having 20 routes like that. It’s a bit of a niche product.”

Where a diverse business model applies, all-premium services can contribute to an airline’s brand and credibility. But for start-ups, a huge challenge lies in finding the clientele, even if differentiation – say, arrival at London City rather than Heathrow – has been achieved.

“It’s very expensive thing, to look for the needle in the haystack – the corporate travellers,” says Morris. “People really want to see a service like that up and running and guaranteed before they’re ever going to risk their most precious corporate travellers on there…

“It’s not just a question of the lie-flat seat and the quality of the Champagne – you’ve got to guarantee that they’re going to be no worse off as a result of this decision, and that’s quite challenging.”

After all, corporate travellers are, adds Morris, “most shy and most sensitive creatures to coax out of their hiding places at the moment, and get to participate in your experiment”. Nonetheless, the experimentation is to be welcomed, argues Morris. “I’m very much in favour of an industry that tries different things because without that how will it ever move forward,” he says. “Look at the classic examples of people saying low-cost carriers will never work in Europe, never work in Asia, never work in the Middle East… It was people coming along with different business models that shook it up and caused everybody to change.”

Access to corporate travellers is plainly less problematic for an airline of Qatar Airways’ scale than for any start-up. But as to the secret ingredient for success with all-premium services, Al Baker is determined that it should remain just that for now: a secret.