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ON THE SOAPBOX: The All-Business-Class Model - Six Months On
On the six-month anniversary of MAXjet”s all-business class flights from Stansted to New York, and with the additional service between Stansted and Washington, DC, now well established, MAXjet chief executive Gary Rogliano comments on an era of innovation in airline travel. Gogliano, an accountant, is based at Washington Dulles. He is a former partner of Ernst & Young and previously chief executive officer of TransPacific Capital LLC, a boutique investment and operating firm with a focus on transportation companies.
”We are at the cusp of an important time in the airline industry. We launched our Stansted to New York service just before Christmas and have already expanded with the launch of a new service from Stansted to Washington Dulles at the start of April. EOS continues with its premium service to New York from Stansted and newcomer Silverjet has also announced its plans to operate an all-business class service between Luton and New York Newark Airport. Whilst Silverjet has some way to go before it takes off, it demonstrates the growing belief that there is a market for transatlantic low fare business class travel.
COMPETITION: With increasingly high expectations from the travel consumer, there has never been a greater need for more differentiation in the business-class airline world.
With the death of Concorde and the size of the premium market in Europe having halved in the last four years, the launch of an all-business-class airline (albeit a transatlantic one) was clearly a brave choice. Yet rather than being a dying breed, the competition in the long haul business class market could not be fiercer, alongside the recent BA announcement to invest at least ”100m to upgrade its long haul business class service, and the growing popularity of Virgin Atlantic”s Upper Class Suite.
We strongly believe that in a market where customers are happy to pay a premium for quality service, there is sufficient demand for the all-business-class model to work ” this is clearly contingent on the right price being charged for business class customers, in opposition to the fees being charged by other major transatlantic carriers whose seats sell for multiple thousands of pounds.
ALL-BUSINESS-CLASS BOOKINGS: The MAXjet model of a one-configuration airline has been met with huge applause, with our booking loads to New York regularly exceeding 50%. We have managed to build up our loads as quickly, if not quicker, than any airline that has developed a new international route and recently for the first time ever, our New York flight was 100% full. Forward bookings indicate that the New York route will average at 70% load factors for the month, with bookings for June also looking strong. The Stansted to Washington route is gaining ground and we are confident in its success with forward bookings for some flights already indicating 50% load factors.
Business class travellers value time, efficiency and a high degree of comfort when flying, so the all-business-class model serves their needs very well. An interesting pattern that has emerged from our competitive fares is that leisure travellers are as likely as business travellers to fly onboard our aircraft. Given that the transatlantic prices are often less than the cost of a premium economy return trip, this has opened up a world of opportunity for the traveller, who would previously have found this option out of reach.
Not only do our forward bookings illustrate the growing success, but the quality of our product is also endorsed by the results from the first ever passenger survey. Some 87% of our customers found the experience to be ”very good” or ”excellent” and 95% of passengers said they would be likely to fly with us again. We are now negotiating for our third and fourth aircraft to expand the MAXjet fleet. FUEL COSTS: Fuel costs are of course a major issue, with the indication being that charges to airlines will remain high. With projected higher fuel prices, it will become increasingly difficult for airlines to make profit margins on their product. Yet the combination of our competitive pricing structure and high-quality product has meant that our load factors are full to the point where we are profitable in spite of high fuel charges.
The all-business-class era is very much here to stay, with MAXjet planning new routes to the States, thereby increasing the range of destinations open to the discerning traveller.”
Gary Rogliano ” May 2006 top