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New carriers focus on the business traveler

Undaunted by the acute crisis in the airline industry, two new carriers are starting up with plans to grab a share of the premium niche market for transatlantic service.

MAXjet Airways and Eos, two privately held firms, were set to launch a service linking New York's John F. Kennedy International Airport and London Stansted Airport, both focusing on the well-heeled, mainly business, traveler.

Eos said it had received US and British approval to start up service tomorrow, two weeks ahead of its original Nov. 1 launch date.

Eos said it was offering an unrestricted roundtrip price of US$6,500 but has an introductory price of US$5,000 for the service in Boeing 757s, configured to accommodate just 48 travelers with an "unprecedented" amount of space and lay-flat beds.

"Passengers who choose Eos for their transatlantic journey will find that we've raised the bar on what business travelers should expect and deserve," said David Spurlock, a former British Airways executive who is founder and chief executive officer at Eos.

"The Eos experience -- embodied in our service mindset, the unique cabin configuration -- is simply unrivaled in today's market," Spurlock says.

MAXjet, meanwhile, offers a more traditional business-class service in Boeing 767s for prices starting at around US$1,600 for round-trip flights, starting Nov. 1.

"We are using the low-fare model but in the business cabin," MAXjet chief executive Gary Rogliano said in an interview. As a result, he said, "we can cut the price by 75 percent."

MAXjet now has three B767 aircraft, including one for charter service, and will be looking at other transatlantic routes, Rogliano said.

Some reports earlier this year said MAXjet was looking to mimic the success of low-cost US carriers like Southwest and JetBlue on international routes.

Although MAXjet studied a number of possibilities, it went with the all-business-class model, Rogliano said, adding that "otherwise, MAXjet would be just like another airline."

He said there is an ability to bring costs down for business travelers because the high fares from those customers often subsidize economy-class fares.

Neither company has released detailed financial data. But EOS said it has secured US$185 million in financing and MAXjet has "10 key investors," according to Rogliano.

Still, analysts say the new carriers are likely to face a number of obstacles in the current crisis environment, in which three major airlines are in bankruptcy.

Deepak Agarwal, senior analyst at the consulting firm Avmark, said that "niches are there, but whenever there is a startup, the major carriers are going to respond."

Agarwal said carriers such as American Airlines and British Airways would match fares and service of any new carriers entering the marketplace.

He noted that there could be some effort to take the place of the Concorde, the abandoned supersonic service of British Airways and Air France, but he said this market no longer exists.

"It's not going to be the same passenger," Agarwal said.

US carriers are looking to international routes that are more profitable while trimming domestic capacity, according to data from research firm OAG.

"International flights produce a higher yield by nature, so it makes sense from a financial standpoint to focus on international travel," said Joe Laughlin, OAG's vice president.

Agarwal said there are some signs the overall aviation industry is coming back from the horrific slump following the Sept. 11, 2001 attacks.

"Revenues are not going up, but people are coming back to fly," he said.

However, a major challenge now is fuel costs, which have hit record levels recently.

"Fuel is bringing down the [profit] margins, and that is the biggest problem for the aviation industry right now," he said.
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