Inspiration for the single-minded
As one reclines in a business class seat on an Etihad or Emirates jet, fresh from being pampered in the airport lounge, Ryanair is a word that rarely springs to mind.
But for one European airline, the budget Irish carrier serves as an inspiration in reviving the boutique aviation model that several have tried – and failed – to make work.
La Compagnie, based in France, is a budget business class-only airline operating between Paris and New York. It plans to start flying between London and the Big Apple on April 24.
Return fares on the new route are priced at £1,100 (Dh6,027) over summer – a little over half the cost of an equivalent business class seat booked with British Airways or Virgin Atlantic.
It doesn’t matter if you turn right on boarding a La Compagnie aircraft as there is no economy class cabin. The airline’s Boeing 757-200 aircraft, usually designed for about 235 passengers, have just 74 flatbed seats, each with a Samsung tablet stocked with movies, TV shows and books. Menus are designed by the renowned French chef Christophe Langrée, and passengers also get access to airport lounges.
None of that sounds very Ryanair. But Frantz Yvelin, the chief executive of La Compagnie, said he has been inspired by the Irish airline – along with the likes of easyJet and Southwest – in his attempt to bring a “revolution in the skies” similar to that achieved by low-cost carriers.
“For years, travelling long-haul was only synonymous with pain – either a physical one at travelling coach class, or a financial one at travelling business,” said Mr Yvelin.
“Obviously, we do not pretend to provide the best business class in the skies. But we certainly have one of the best on the North Atlantic [and are by] far the most affordable.”
Examples of how the qualities of the no-frills airlines extend to La Compagnie include the airline’s location in a cheaper Paris suburb, the fact that each flight will have just three cabin crew, and Mr Yvelin’s claim that his salary is lower than that of the pilots he employs.
Even the management style of the outspoken Ryanair chief Michael O’Leary – who once proposed charging passengers for using the toilet – had been an inspiration in structuring the business.
“I am clearly considering Ryanair as a role model when it comes to the one-product-only philosophy – to our cost structure, to our yield-management strategy, or even to our in-house management style,” said Mr Yvelin.
Yet history does not bode well for the carrier. Three such airlines – Silverjet, Eos and Maxjet – launched in the UK during the noughties, and all failed in quick succession in 2008.
On the other hand, L’Avion – a fourth European business class-only carrier, which flew between Paris-Orly and Newark and was also founded by Mr Yvelin – was acquired by British Airways for £54 million in 2008. It later merged with BA’s OpenSkies subsidiary, which now operates aircraft with three-class cabins.
Some analysts believe there is little chance La Compagnie can succeed where the others failed.
Saj Ahmad, the chief analyst at StrategicAero Research, said the airline was “on borrowed time” and would not survive if oil prices returned to US$100, something the airline disputes.
“It was the high fuel price environment of 2007 that killed Eos, Silverjet and Maxjet,” he said.
“Ryanair and easyJet are brilliant models. But is La Compagnie? Not a chance. The other two airlines are not exclusively business class operators, so they have a bigger diversified customer base … I struggle to make the connection as to how this is inspiring when you ostracise the very market that Ryanair and easyJet ply their trade in.”
John Strickland, an aviation analyst at UK-based JLS Consulting, said business travellers like to have backup services for when flights are delayed or cancelled. And that is something BA and Virgin, but not La Compagnie, can provide.
“The crème de la crème market segment and customers expect frequent flights with all the trimmings, and all the backup when something goes wrong,” he said. “Operating in isolation at a London airport other than Heathrow [Luton] with an unknown name will be a real uphill struggle.”
Josh Marks, a former executive at the failed airline Maxjet, said La Compagnie would “succeed to a point”, but said that raising capital for expansion could be a challenge.
“Prospective investors will be increasingly sceptical about La Compagnie’s growth potential,” said Mr Marks, who is now the chief executive of the US-based masFlight, which specialises in data analytics for airlines.
“While the airline may become the biggest all-business-class boutique [carrier], it’s still competing in a niche market segment with a cap on the number of viable routes.”
The Maxjet business model was inherently flawed because it wasn’t robust enough to survive the financial crisis, Mr Marks added. “Making a bet on a single demographic … creates problems when the economy tanks,” he said. “Combine a drop in demand with a spike in fuel, as we saw in late 2007 and 2008, and it’s hard for boutique airlines to survive. That’s why so many carriers died during that period.”
Given the difficulty of establishing a specialist business class-only airline on prime transatlantic routes, few paint a rosy picture of the viability of such a carrier taking off in the Arabian Gulf.
Qatar Airways last May launched its Business One service between Doha and London, which flies an Airbus A319 with 40 lie-flat seats and no economy class. But there is no dedicated business class carrier in the region – Silverjet flew between the UK and Dubai for just a matter of months before flights were suspended when the airline failed. And ArabJet, a proposed business class-only airline based in Dubai, does not appear to have got off the ground; its former chief executive, Mohammed El Shanti, did not respond to requests for comment.
Chris Tarry, a consultant at Ctaira, a British aviation consultancy, said it would be “challenging” to launch such an airline in the Gulf compared with on busy point-to-point transatlantic routes.
“It’s a market with volume, but a lot of that volume is driven by connecting traffic,” he said of the Gulf market.
The strength of the big three Gulf airlines – Emirates Airline, Qatar Airways and Etihad Airways – means that launching a business class-only airline in the region would not be an easy task, said Peter Morris, the chief economist at Ascend Flightglobal Consultancy.
“The three main incumbents in the Middle East have become too strong and know their markets inside and out,” he said. “I am sure someone will try it, but again the path to build up a brand will be long and challenging.”
Even Mr Yvelin said a scheduled all-business class service to a market such as Dubai does not currently make sense. But he did not entirely dismiss the model in the Gulf market. “I never said ‘never’,” the French executive said.
Published: April 5, 2015 04:00 AM