US Needs More A
Luxury Long Haul Airline Than A Budget All Premium Class Airline
By Philippe Louis
July 10, 2011 - Many of us remember the enthusiasm of
airline entrepreneur for the budget long haul all
premium class airlines in the second half of the last
decade. L’Avion, Eos, Max Jet and Silverjet were all
based on the same concept: carrying business travelers
and high net worth tourists at a cost far less than what
is offered by traditional transatlantic airlines.
Only one (L’Avion bought by British Airways) of these
ventures survived the stunning oil price rise of 2008.
It is also good to notice that half of them were U.S
carriers (Eos and Maxjet). But did our country need more
budget long haul all premium airlines or luxury long
haul all premium carriers. My choice is for the second
option. Here are some reasons.
Fill The Class Service Quality Gap Between U.S. Carriers
And Their European And Asian Counterparts
USA have the biggest share in total air traffic demand and
premium air traffic demand, their class services and overall
products quality are far behind Western European, Asia-Pacific
and Middle Eastern carriers. The two first airline crisis of the
21st century (2001-2002 and 2008-2009) caused U.S. majors to
suffer heavy losses and prevented them to invest massively in
class service quality and innovation.
innovations came from Asia Pacific and Middle Eastern
transporters. Asia-Pacific carriers have weathered the crisis
better than the U.S. ones. Middle East airlines (Emirates, Qatar
Airwyas, and Etihad) have benefited from strong state support in
building worldwide network, global brand image, and class
industry observers, customer service on U.S. airlines is a dying
art and especially on legacy carriers and service levels have
plummeted to historic lows. Currently only 2 out of 5 U.S. FSNC
offer first class services: United and American.
they do not offer as many amenities as European and Asian
carriers. The recent Skytrax rankings sent a strong signal to
the U.S. airlines. Actually there’s no 5 or 4 star U.S major
airline. Only JetBlue obtained 4 stars in the ranking.
From Non Existence Of Industry Reference In The Sector
Demand for premium services in air travel grows as the volume of air traffic itself swells. Progressing economic expansion of China, India, Brazil, Russia, some Middle East and some Asian countries will keep generating demand for enhanced class service qualities in air transport.
FSNC are spending more and more in high-end services and are getting
more and more inventive (first class suite, on board bar, on board
lounge, on board duty shop, on board shower, lounge piscine, first class
terminal, limousine service, concierge service, etc.).
the U.S air transport industry needs a real reference in premium travel.
The all-premium budget carriers failed to fill that role. Their
bankruptcies and their nature (budget) prevent them to do so. Even
Openskies (although not a U.S airline) which survives didn’t impose
itself in an industry in hunt for a real role model like Southwest
Airlines. Its lack of ambition and slow growth (only 2 routes and 4
airplanes in 3 years of operation) prevents it to play a serious role.
3) Shift From
Private Jet To Commercial Aviation During Economic Downturn
demands for business jets drop. Many private customers are looking for
more affordable travel modes but with high quality service and numerous
amenities. All through difficult economic times, companies cut first
expenses that are the less relevant to the production of goods and
services and to the continuation of their activities. Corporations
usually slash on frivolous expenses or adjust them to a more economic
form. Naturally travel on business jets is one of them.
2008/2009 financial crisis, what did we learn? As example, in United
Kingdom, corporate jet travel has slumped by more than 20% in from July
2008 to January 2009, according to data published by the Civil Aviation
Trips on private
jets took off in the pre-crunch years, as executives and self-made
millionaires were swayed by flexible schedules, lack of baggage
restrictions and departure lounges uncluttered by commercial airlines
travelers. Small airports such as Farnborough and Biggin Hill near
London have fast-tracked millions of executive passengers since 2003,
when business jet travel began a four-year boom.
grew by 14% annually to about 150,000 a year. Corporate jets have been
hit harder than airlines also because they are not locked into schedules
so a fall in demand immediately leads to fewer flights. During the same
period first-class travel from London's biggest airports fell only by
6.3%. Globally, high net worth individuals less often used private jets
for long haul travel and flew first class instead.
manufacturers such as Eclipse have been hit by the crisis so hard that
they went bankrupt; others such as Cessna laid large development
projects on ice. The precipitous and rapid decline of the business jet
industry in 2008 and 2009 resulted in cancellations exceeding gross
orders, causing a significant reduction in firm order backlogs and
We do believe that
regular business jet customers are looking to switch from business jets
to luxury commercial premium travel instead of budget premium when they
want to save on travel expenses. Even if they tend to relinquish
business jets during hard economic times, they still want some perks in
regular commercial flights.
Foreign Carriers Supremacy In First Class Services On U.S.
an unbalanced supply of first class services from the USA in favor of
foreign carriers. In July 2011 only 2 U.S. carriers were providing first
class services from the USA: American Airlines and United Airlines. At
the same time there were:
carriers: Air France, British Airways, Lufthansa, and Swiss Intl’
Airlines, Transaero Airlines and Turkish Airlines
-5 Middle Eastern
carriers: Emirates, Etihad Airways, Kuwait Airways, El Al and Saudi
-1 Latin American
-12 Asia Pacific
carrier: Air China, China Eastern Airlines, China Southern Airlines,
Hainan Airlines , Singapore Airlines, Cathay Pacific, Thai Intl’
Airways, Malaysia Airlines, ANA, Japan Airlines, China Airlines, Korean
Air, and Asiana Airlines.
This makes a total of 26 foreign carriers. Consequently, In July 2010, U.S. carriers only offered 36% of first class services (in terms of weekly flights) nationwide, 15.6 % in New York metro area, 13.7 % in Los Angeles and 16.2 % in Miami.
5) Profit From
Monopoly Opportunities On Many Markets
As many North
American, European and Latin American carriers relinquished their first
class services to rationalize their costs structures and to be in better
position to face the growing influence low cost carriers, opportunity to
establish back these services appeared.
If it is evident
that U.S companies have to fight back to have a reasonable share in the
premium services to the Middle East, Paris, Frankfurt, Switzerland,
India, South East Asia, there are some markets where the first class
service doesn’t exist at all. Those markets are routes from New York,
Miami, Chicago, and Los Angeles to other prominent world economic
In these markets,
passengers have to buy either a business class ticket for $ 5,000 or
rent a private jet for $50,000 because there’s no intermediary service
at all. As companies become more global, Western companies are
establishing branches in the Emerging markets and companies from China,
India, and Russia are buying Western companies and are opening offices
in Europe and North America, the market for premium travel (first and
business classes) is anticipated to be prosperous.
there’s a no first class service from New York to Brussels, Dublin,
Helsinki, Madrid, Milan, Rome, Amsterdam, Johannesburg, Stockholm,
Copenhagen, Vienna and from Los Angeles to Madrid, Amsterdam, Rome.
All these markets
show clear evidence of needs of first class service and additional
luxurious amenities as they exist on many routes from USA to the Middle
East and Asia-Pacific regions because of strong volume of business
travelers and high net worth passengers. Other similar opportunities
also exist from Houston, Miami, Chicago and Washington DC.
6) Profit From
Increasing Globalization Of The World Economy, Soaring Economic
Empowerment Of Some Countries And The Number Of Their High Net Worth
Economic globalization will bring higher trade volumes between countries and more economic interrelations. Its consequence on air transport will be an increasing need of travel from people directly involved in inter-country business and trade. This trend will feed a larger demand for long haul business travel to served distant countries and world’s regions: USA-China, USA-Brazil, Europe-Africa, Africa Middle-East, USA-Western Europe, Europe-Asia, etc.
theses countries become economically more powerful, their companies
become bigger and are expanding their influence in the Western market by
buying North American and Western European companies, or expanding
partnerships and trades with them, demand for luxurious form of travel
(business jets, first class and business class with plenty of luxurious
amenities) from these countries to North America and Western Europe will
In 2005, in the
Fortune Global 500 list, there were 27 countries from the BRIC, in 2010,
that number rises to 67 a 148% increase in just 5 years while the Big 5
of Advanced countries (USA, Japan, UK, Germany and France) loss 15% of
their companies in the list (from 368 to 315).
An evident social
consequence of these countries economic rise is the rapid expanding
number of their high net worth individuals (billionaires and
millionaires). As example, China has more than a million millionaires as
economic growth, savings and a strengthening currency helped swell their
ranks by 262,000 last year, according to a Boston Consulting Group
Millionaire households jumped 31 percent in 2010 from the previous year to 1.11 million, the BCG Global Wealth Survey released showed. In 2008, India recorded the fastest millionaire growth in the world. Individuals from other countries like UAE, Qatar, South Africa, South Korea, Singapore, Hong Kong, Malaysia, Ukraine, and Turkey will also profit from the rapid expansions of their countries’ economy.
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