Even within the rarefied strata of super-premium airline services, the battle remains the same. Will passengers pay a full price for a unique product or is price the decider here as well? Nowhere is this battle being waged more tactically than on the North Atlantic, where two carriers are playing a high-stakes game for this niche – long confined to the front of the cabin on established airlines such as British Airways or Virgin Atlantic.
Both contenders are seeking to woo the investment bankers, executives and consultants who fly the New York-London route and both have chosen the same airports – New York JFK and London Stansted. Also, each began service within days of the other. But there the similarity ends.
One contender, Eos, is at the top of the range with lie-flat beds and large amounts of space, at a premium price, while the other new entrant to this niche, MaxJet, is basing its challenge on the premise that value-enhanced business-class service for an affordable price will prove attractive.
Eos is stressing its onboard food and high level of service. And with fares listed as high as $6,500 return, it should be. But Eos founder David Spurlock, a former BA executive, insists that in an industry that has “chronically been underinvested in and under-differentiated, it is the product that is most developed and most differentiated that will win”. The carrier, which began service in October with 48-seat Boeing 757-200ERs, says it is “dedicated to constant improvement to become the best”.
Rival MaxJet has put 102 seats on 767-200s offering a seat pitch of about 60in – comparable with the business class found on US carriers. The seats recline, but do not lie fully flat. But MaxJet plans to undercut business-class ticket prices. Return fares range between $1,600 and $3,800. The selling point, says chief executive Gary Rogliano, is “rather than going economy, come take that fare and get it with us. Our goal is to bring affordable business-class service to a broader base of the market.”
Rogliano, who was previously chief executive at Pittston, the parent company of air cargo carrier ABX, says his original plan was for a low-cost transatlantic entrant that would link discounters at both ends, interchanging passengers with no-frills domestic players such as JetBlue Airways at JFK and easyJet at Stansted. But after looking at North Atlantic yields, Rogliano instead opted for an all-business-class model.
Since Concorde service ended in 2003, several groups have been studying the luxury niche. Consultant Bob Mann of RW Mann and Associates, a veteran of the transatlantic marketing wars of the 1990s, says the competition is the “classic case of the highly differentiated product versus a value proposition”. He adds: “For the super-premium to succeed, it has to work ideally at every point of contact – and that’s not easy. For one or the other, there may be enough crumbs from the big guys’ table to prosper, but even then it will be tough.”
The two start-ups know they face tough competition. Between JFK and London Heathrow, the majors offer at least 17 daily flights, with business travellers preferring Heathrow to Stansted, Gatwick or other UK airports. Both feel that JFK is simply so established as an international gateway that they have to use it and both have avoided Gatwick, arguing that Stansted’s location to the north-east of London is a virtue rather than a liability. A rail link runs into London’s financial centre, while in the other direction are the growing businesses of the Cambridge region. MaxJet’s Rogliano calls this “the Silicon Valley of England” for its increasing number of hi-tech and biotech businesses.
No US-based airline has ever been able to succeed at Stansted from New York, but both airlines have made intense sales efforts to reach the UK companies that would find Stansted a natural choice. Both start-ups are privately funded with enough capital, they believe, to support a gradual transition to profitability, and they insist the majors’ response is no cause for alarm.
But with international yields delivering a premium of 10% or more to US domestic yields, the majors, especially those enjoying the premiums that Heathrow allows, are certainly watching closely. Global Aviation/Intervistas consultant Jon Ash cautions: “The network carriers may say they’re ignoring them, but they’re not. They can squash them easily and legally.” ■
Source: Airline Business