All-business class airlines tend to fail because they are not competitive

Seems like a very good idea. We configure our planes with only large, comfortable seats and serve great food and wine. Then schedule a flight between her two big cities like London and New York. It is clear that there is enough business demand to make this idea a reality. In fact, the idea is so good that it has been funded many times and is still being tried. Book your flight now with La Compagnie, the all-business class airline that flies between New York and France (both Paris and Nice) for just $2,400 round-trip. According to Expedia, the cheapest business class flights from New York to Paris at the end of June range from $4,000 to $10,000 on major airlines. La Compagnie must have found their niche.

Not exactly. Most likely, La Compagnie is focusing on tickets with many empty seats and holding a sale in the hope that its larger competitors won't be able to match the price. History shows that most all-business class airlines fail, leaving investors with money and customers stranded. Eos tried this from New York to London, as did the UK's Silverjet. MGM Grand attempted to fly all-business class jets from Dallas to Chicago and Los Angeles by taking advantage of a loophole in the Wright Amendment, which was then in effect at Love Field Airport in Dallas. All-business class airlines often fail for a variety of reasons, including:

High demand doesn't always exist

Airlines are paid every day of the year for planes, personnel, and real estate. There is not always high demand. Having to sell expensive seats at the lowest price to fill a plane is not a winning strategy. Choosing routes to fly based on good business demand often precludes the ability to reallocate planes to other opportunities during times of the day, week, or year.

The best business airline in the United States is probably Delta Air Lines. Because Delta Airlines is best at attracting the highest paying customers. However, Delta Airlines also has many economy seats. This is because they realize that business travel will not be on his flight all 24 hours a day. They also recognize another business reality. Sure, there can be a price premium for a better product. However, scarcity can also create a price premium. Why doesn't Harley-Davidson make more motorcycles? For that matter, why do Boeing and Airbus have years' worth of backlogs? If every seat is really nice, only some are. People pay less than if they were nice.

Products are not just installed on airplanes

The biggest product that airlines can offer their customers is their route network. Being able to go anywhere you want to go is powerful and often trumps anything else. Flights from London to New York are perfect if London is where you want to start and end your journey. But is this all there is to travel? If you're a member of United's frequent flyer program and fly most of your trips to and from New York on United, why would you choose another airline just to fly to London?

Products also include things like corporate contracts that allow employees from multiple cities to save on travel costs. This is a loyalty program that can offer upgrades and free flights, and can be tied to non-airline spending through the use of credit cards. This is a dedicated phone number that supports me as a frequent flyer and allows for quick recovery in the event of a problem. The product is all about that, in addition to good seats, good food, and friendly crew.

All business class airlines combine great products with great airport and in-flight experiences. That's just part of the product, and what you're missing out on as a regular traveler is very important.

Large networks have significant competitive advantages

Large networks have significant advantages over smaller, non-stop competitors. The modern partnership began in the early 1990s when Northwest Airlines, then the fourth largest airline in the United States and Europe, and KLM Airlines formed a joint venture. The connection between these two networks worked well and was the forerunner of today's Skyteam Alliance. At one point, the airline was offering five flights a day between Detroit and Amsterdam on large planes. This is possible because each operates large hubs at these stations, making all types of connections around the world available for the first time in a single alliance.

Compare this to what all business class airlines offer on their apparently largest single route selection. With so many ways to funnel customers in one direction of a route and distribute them at the other end, it means that major airlines and their partners can diversify their passenger bases in ways that nonstop airlines cannot. Masu. Ask any former Eos, Silverjet, or Maxjet employee and they'll tell you that, along with their mileage programs and corporate contracts, these were the factors that made it impossible to compete even with superior in-flight products.

Strengthening competitiveness

Airlines that perform well against large network carriers are low-cost carriers. They can offer freight rates that are less economical for larger companies and attract price-sensitive customers. In doing so, they pose a small threat to major airlines focused on attracting high-paying passengers.

When a corporate airline was launched between New York and London, it was a serious threat to the major airlines operating this route. That's because anyone who would pay for better service was their target customer, so they did everything they could to make it harder to compete. It didn't matter because they only served one or two routes and only had a few planes. Everyone they were transporting was considered a stolen guest. While intensely focused on these airlines, it was still often ignored or passive about much larger airlines, including airlines like Southwest Airlines and later Spirit. .

Economy without economies of scale

Low costs aren't really possible on all business class airlines. The use of real estate on board is inefficient by design to give everyone space. Offering high quality food and drinks and excellent space at the airport is also expensive. But the real cost issue comes from the fact that there are no economies of scale for airlines with only a few aircraft, all business class. This means you pay almost everything at the rack rate. By comparison, much larger competitors may operate even less efficiently, but because of their scale, most of their costs are lower.

In addition to this, all-business class airlines are trying to attract customers who pay higher fares. This means dealing with expensive distribution, requiring salespeople, and resulting in higher selling costs per customer. Add cost inefficiencies to a lack of network strength and a meaningful loyalty program, and it's easy to see why most of these businesses fail.

Leisure travelers subsidize business travelers

This helps explain why for major airlines, it's the low-cost leisure customers that actually subsidize the high-value business customers. If airlines like Delta Air Lines, American Airlines, and United Airlines only carried business travelers, their networks would be significantly smaller. The high frequencies and network depth that are so convenient for business customers are only possible because airlines can take advantage of pricing and fill empty seats with flexible leisure passengers.

This is not to say that all business class airlines fail. I'd be surprised if La Compagnie is still here in five years, but maybe it'll be thriving. Also, in certain regions this approach could work well, and airlines like his JSX with sufficiently small planes and low costs have created interesting models.