Business class fails to take off

30th April 2008

By David Parkin
Editor

AND another one bites the dust. At this rate by the time I've saved up enough money to be able to afford to fly business class to New York, there won't be any airlines left to take me.

This week saw the departure of business class-only carrier Eos, which flew what it termed a "budget first class service" from Stansted to the Big Apple on Boeing 757s carrying just 48 passengers each.

It filed for Chapter 11 bankruptcy protection on Monday and cancelled all its flights.

It following in the downward vapour trail of Maxjet, the premium airline which also flew from Stansted to New York as well as Washington, Las Vegas and Los Angeles, and which collapsed earlier this year.

That only leaves Silverjet, as the last of the British all-business-class carriers. But the skies look pretty cloudy for that airline, which has seen a collapse in its share price from £2.09 to 14p in the last 12 months and is seeking new investors to secure its longer term future.

You'd have to have deep pockets and a lot of confidence to back a business class only airline in the current market.

What all these airlines banked on when they launched was winning disatisfied business customers from British Airways and Virgin.

And let's face it, there were plenty of them even before the Terminal 5 fiasco.

What Eos, Maxjet and Silverjet offered was not just an alternative but one that was around half or even a third of the price of the established operators at about £999 for a return flight to New York.

The attraction of travelling on an airline where every passenger was business class, where the staff didn't have the poor attitude that many of those working for BA and Virgin have, was plain to see.

But so were the costs of entering such a business.

None of these three premium-only carriers ever made a profit. Eos said that it had lost $37m (£18.6m) in the first nine months of last year on revenue of $53m while Silverjet is estimated to be losing about £1m a month.

Eos, which was founded by David Spurlock, a former British Airways executive, was the first of the low-cost business operators to launch, starting flights in October 2005, and it raised $212m from private equity groups and individual investors.

The airline had a great reputation among passengers and is thought to have been included on the preferred airline lists of a number of big institutions when flying their executives across the pond.

However rising fuel prices and the tightening economic situation which saw companies cutting back their travel budgets hit the likes of Eos and Maxjet and they just didn't have the resources to keep going until things improved.

The evidence is that even the established carriers have been hit by similar issues. British Airways recently announced that it will end its flights from Manchester to New York because it can't attract enough business class passengers onto the flights. While the demand for economy seats on the Manchester-New York flights is still high, it is the premium-priced seats that provide the airlines with the bulk of their profit.

So when I do finally have enough money in the bank to jet off business class, it looks like it will be a frosty-faced BA or Virgin stewardess handing me my glass of champagne, rather than a smiling staff member from one of the young upstarts.

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