This is a story of two new airlines, Eos
and Maxjet, that launched their first service on the same
international route at nearly the same time with an
all-premium-class product.
But this also is
a story of two carriers that now appear to be progressing at a
different pace, with one of them, Eos, compelled to make some
changes in its pricing and distribution strategy.
Eos launched its
service first when it began flights between New York (Kennedy) and
London (Stansted) Oct. 18.
Eos considers
itself the airborne version of a boutique hotel, offering premium
service on a 757 aircraft reconfigured for just 48 lie-flat seats
that provide 21 square feet of space per passenger. In addition to
departure lounges, five-course meals and on-demand entertainment
systems, Eos also offers amenities such as Bose noise-canceling
headphones, wool-and-cashmere blankets and a concierge
service.
Eos took flight
with a product aimed at high-end travelers willing to pay $3,250
each way (aside from a $2,500 introductory fare at launch). As Eos
began service, CEO David Spurlock said his airline would match
competitors corporate discounts at first, but over time he expected
customers would be willing to pay a higher fare for the Eos level
of service.
That may yet
prove true, but the first few months indicate it wont be
easy.
New Eos
fare structure
A few weeks ago,
Eos launched a new fare structure with four levels: 30-, 14- and
seven-day advance and within seven days, at prices ranging from
$1,600 to the original $3,250 one-way. About two weeks later, Eos
changed the 30-day advance to a weekend fare that requires a
seven-day advance and a Saturday-night stay, at a cheaper one-way
price of $1,475.
John Rindlaub,
Eos executive vice president of marketing, said Eos created the
four-level fare structure and made the subsequent change primarily
in response to very aggressive pricing by competitors. But he said
Eos also is offering lower price points after discovering more
high-end leisure travelers than anticipated, including celebrities,
were interested in the service.
Eos also has been
discounting its fares for corporate deals.
Nonetheless,
Rindlaub said Eos still expects most of its bookings to be on its
highest fare category and still expects customers to be willing to
pay a premium, eventually.
This is our entry
strategy, and over time when you have a superior product you can
have pricing power in this business, I believe, Rindlaub
said.
Eos also has
altered its schedule, changing its London departure from 10:30 a.m.
to 6:30 p.m. With the morning New York flight arriving in London at
7:48 a.m., the new schedule accommodates business travelers who
want to fly to London, conduct their business and fly back the same
day.
Eos postponed
plans to increase its service, but now it is taking bookings for a
second daily flight tentatively scheduled to start May 1. The new
service will add a later morning departure from New York and a
midmorning departure from London.
The launch date
of the second daily flight may yet be moved up or postponed but
definitely will be sometime in the second quarter, Rindlaub
said.
Eos also altered
its distribution strategy. It originally planned a low level of
participation in GDSs but instead signed deals for full
participation in Galileo, Sabre and Worldspan -- and is in talks
for a deal with Amadeus -- because agencies and corporations
demanded it.
In the grand
scheme of things, when youre an airline its a pretty small expense
compared to fuel prices and other things, Rindlaub said.
So how is
all of this working?
Rindlaub said
bookings are picking up each week, primarily because the airline
has signed tens of corporate deals, with companies it will not
name, that are just now beginning to show up in
bookings.
Rindlaub said Eos
also has seen inquiries triple since the launch of a
multi-million-dollar advertising campaign that began in mid-January
and is continuing in the New York Times, the Wall Street Journal,
Londons Daily Telegraph, business and upscale leisure magazines,
New York commuter rail lines and London Underground
stations.
Eos, however,
refuses to disclose its load factors. That has led some industry
observers to speculate the airline is struggling to fill
seats.
Rindlaub
criticized the speculation but declined to provide any indication
of the percentage of seats that are being sold.
He insisted the
refusal to disclose is because Eos is a privately owned
company.
Maxjet
courts a different flyer
Maxjet, which
began its New York-London service Nov. 1, also is privately owned,
and CEO Gary Rogliano wouldnt reveal his airlines specific load
factor either. But Rogliano did say Maxjet has been filling more
than 50% of its seats, and some days as many as 70%.
Its passenger mix
has been about 50/50 between U.S. and U.K. travelers, he
added.
Maxjet, which
markets itself as a low-fare, business-class service, is targeting
a different customer than Eos.
Maxjets market
demographic is business travelers who might pay extra to fly in a
traditional airlines premium economy class but are not able or
willing to shell out thousands of dollars for business
class.
Maxjet
reconfigured its 767 aircraft for 102 seats, about half the usual
number, but added three to four more flight attendants per flight
for increased attention and service. Maxjets leather seats dont lie
flat like the business-class seats of some competitors, but they
come close and provide 60 inches of leg room, with no middle
seats.
The airline also
offers departure lounges, an on-demand entertainment system and
upscale four-course meals.
On Jan. 18,
Maxjet began selling tickets for travel on its second route:
Washington- London, which launches March 15 and will be offered
four days a week. Maxjet is based at Dulles.
On March 18,
Maxjet will begin a Saturday flight on the New York-London route,
which will make it a daily service.
Maxjet executives
are eyeing Boston for the airlines eventual third market, in part
because of the biomedical industry and JetBlues presence there;
Maxjet prefers destinations where travelers have the option to book
a connection on a low-cost carrier, and it has aspirations to reach
some sort of arrangement with JetBlue.
There already is
a link on Maxjets home page to the Web site for Easyjet, which
flies out of Stansted.
Further ahead,
Maxjet is looking to expand to markets such as Chicago, Dallas, Los
Angeles, San Francisco and San Jose, Calif.
Maxjet is
double-coded in GDSs, so its fares will show up in both
business-class and economy-class searches. Rogliano believes Maxjet
can be competitive with other airlines last-minute coach
fares.
Maxjets one-way
fares from New York start at $679. From Washington, fares will
start at $806 one-way, except for an introductory roundtrip fare
that comes to $999, including taxes and fees.
Rogliano said
Maxjet decided on its regular fares based on jet fuel costs of
about $2 a gallon, which is slightly above recent
prices.
Our model is
sustainable, Rogliano said.
To contact
reporter Andrew Compart, send e-mail to [email protected].