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 The Brancatelli File

joe ACTION OVER
THE NORTH ATLANTIC


BY JOE BRANCATELLI

October 27, 2005 -- Even if you never fly internationally, pay attention to what's happening on the New York-London route. Two new airlines are launching and they are pursuing a pair of worthy goals that have domestic as well as Anglo-American application.

Eos Airlines, which took off last week, bills itself as a premium-class airline for business travelers who need and want extra-special treatment and are willing to pay for it. Maxjet Airways, which launches next week, is trying to bring low fares to business class.

Both carriers are flying specially configured, one-class jets. Both are flying from New York's Kennedy Airport. And both fly to Stansted, a once-sleepy airport in the London countryside that is now at the center of Britain's low-fare revolution.

Since it's been in the air since October 18, let's talk about Eos first. It is flying Boeing 757s configured with just 48 suites. Eos founder and chief executive David Spurlock says that "we don't describe ourselves as a first-class or a business-class airline," but it is clear that Eos is selling international first-class travel at business-class fares. It has also adopted the fare code R--the letter once used to flag Concorde service--as its computerized identity.

The introductory price for tickets purchased through January 3 is $5,000 roundtrip. The Eos walk-up fare is $6,500 roundtrip, which is less than half the unrestricted first-class rate between New York and London and almost exactly the 7-day advance purchase price that British Airways introduced last week for its business-class seats.

The Eos seat looks like the first-class suites that the best carriers offer in first class. There's a comfortable armchair that reclines to a flat bed that measures 78 inches long. Passengers receive cashmere blankets and Tempur-pedic pillows. There's an ottoman that doubles as a companion seat, a big retractable table and all sorts of privacy screens and barriers. One neat trick: All the Eos suites are configured so they have both window and aisle access.

"Our suites were designed from scratch to offer individuals privacy, but they were also configured so people could comfortably work in groups," says Spurlock, a former British Airways executive. "Our companion seat in each suite is 22 inches wide," which is wider than some airlines' business-class seat."

The Eos passengers I've talked to have all raved about the Eos suite, the helpful staff, the high-quality in-flight meals, the easy check-in procedure at Kennedy's new Terminal Four and the fast customs and immigration clearance at Stansted. (About the only complaint: a less-than-state-of-the-art in-flight personal entertainment system.)

Who's the market for all these frills?

"The community of international business executives who fly the transatlantic all the time," says Spurlock, who hopes to launch a second daily Kennedy-Stansted flight next year. "We're a small, hassle-free airline that understands their particular needs and desires. This community wants to make the transatlantic run quickly and comfortably and then move effortlessly into a series of meetings."

Maxjet, scheduled to launch on Tuesday, will use Boeing 767s configured with 102 seats. The chairs offer 60 inches of legroom. That's industry standard for international business class, but BA and Virgin both offer lie-flat beds in their business classes between the United States and Britain. Maxjet is also promising business-class meals, snacks, airport lounges and other perks.

Maxjet's one-way fares start at a delightfully low $679 and top out at a walk-up price of $1,979. (The walk-up business-class fare on Virgin tomorrow is almost $4,500 one-way.) Maxjet has also "double coded" its fares with both coach and business-class designations. That bit of computerized legerdemain should permit travelers whose companies bar the purchase of business-class fares to fly Maxjet without a corporate inquisition.

Gary Rogliano, the frequent-flying businessman who stepped in as Maxjet chief executive in March, explains the airline's philosophy simply: "We're applying the low-fare model to the business cabin. The critical point is the price point. Maxjet has everything you'd expect in business class for 75 percent less."

His expected market: New York-London business travelers who have been priced out of business class by BA, Virgin and the U.S. carriers who ply the route; "affluent economy customers" who will pay a little more to get a lot more; and flyers whose companies are relocating to areas near Stansted.

"Sixty-five percent of my traffic is going to originate in England," says Rogliano. "And the Stansted area is growing. We're flying where the demand is."

Of course, Rogliano and Spurlock only speak to the happy news and the internal logic of their airlines. But both efforts are extraordinarily risky. I personally can't imagine both start-ups surviving. I'd say it's 50-50 that even one of them survives five years.

For starters, one-class luxury airlines have had a dreary history. (Regent Air, MGM Grand, McClain and Air 1 all failed.) Flights to Stansted from New York have failed before, too. (American and Continental both abandoned the route over the years.) New York-London travelers loyal to U.S. flag airlines might not be willing to give up their lavish frequent-flyer program perks and miles. Customers loyal to British Airways and Virgin Atlantic have in-flight service of roughly similar quality (albeit at much higher prices) and receive the benefit of BA's and Virgin's more-frequent flights. (BA flies seven times tomorrow between JFK and London/Heathrow.) Then there are the prevailing market conditions: Fuel costs are astronomical; overseas travel in general is slipping; the New York-London route is already overcrowded; and the first and fourth quarters of the year are traditionally miserable for the airlines.

Still, the market is huge--BA alone carries three million passengers between the United States and Britain, the vast majority of them on New York-London flights--so neither Eos nor Maxjet need to steal all that many passengers to succeed.

Rogliano, for example, says that Maxjet, which hopes to add flights from other cities next year, analyzed 15 routes to London from the United States. Just 8 percent of the travelers generated 50 percent of the revenue "and I only need 5 percent of the New York-London market" to make Maxjet fly, he claims.

This one will be fun to watch, folks.

Copyright 1993-2005 by Joe Brancatelli. All rights reserved.