Aviation's Last Cash Cow

Airlines compete with vigor for the luxury trans-Atlantic customer as comforts wane for domestic economy fliers

May 07, 2006|By MEREDITH COHN | MEREDITH COHN,SUN REPORTER

When Maurine Davis was planning a vacation to England and Italy from her home in Des Moines, Iowa, earlier this year, she found that trading the uncomfortable squeeze of the economy cabin for a nicer seat upfront on the airplane would cost her $6,600.

She chose instead to hop a Northwest Airlines plane to Washington Dulles International Airport, where she boarded an upstart discount carrier called MAXjet Airways that promised creature comforts and a sale price under $1,000.

"My son was looking online for me, and when he said MAXjet, I said who?" she said of the all business-class carrier that launched April 3 from Dulles.

"I'm pioneering. I liked the price. We'll see how it goes," Davis said.

She won't be the only one.

Airlines, from new discounters to the traditional carriers, are keenly aware of each other's moves in a growing battle for what may be the industry's last dependable cash cow - the richest customers on some of the world's most popular routes between the United States and the United Kingdom.

The luxury trans-Atlantic flier is being treated to even more pampering at the same time the airlines, faced with rising labor and fuel costs and intense price competition, are cutting such things as food and pillows for passengers in the domestic economy seats.

British Airways, Virgin Atlantic Airways, United Airlines and American Airlines are adding flat beds and improving entertainment and stowage space in their premium cabins. They face not only MAXjet, which is targeting business travelers, but another overseas discounter, Eos Airlines, offering all first-class service. Both fly a handful of times a week from Washington or New York to London.

"We take them seriously," said Martin George, commercial director for British Airways, in an interview in Baltimore recently, about the upscale overseas entrants. "Our response is the new business class. We want to respond before the question gets asked about what we are doing. ... We need to offer a great value for the money."

British Airways has long been linked to English refinement and at one time didn't think discount airlines were a threat. George said the airline mistakenly ignored two upstart European carriers, RyanAir and easyJet, that swiped BA's economy-class business for years before the bigger carrier cut fares.

George said the airline was expecting competition from discount rivals on international routes eventually, but not necessarily targeting its top-tier passengers on its busiest overseas routes.

It's these passengers who are really worth preserving. Premium cabins (business and first class) typically comprise 10 percent of the seats on major airlines but produce up to half the income.

MAXjet launched service to London in early April from Dulles, its headquarters. It began service from New York's John F. Kennedy International Airport to London in November. It flies 102 business class-only passengers on Boeing 767s built for more than 200, and offers seats that deeply recline, "restaurant-quality" meals and 60 inches of space between people. Non-sale fares start at $1,750 round-trip.

Eos began its all first-class service in October from New York to London. It seats only 48 first-class travelers on its Boeing 757s, a narrower plane also meant for more than 200. Eos and MAXjet fly to London's Stansted airport.

"We offer one kind of plane and one kind of seat and that costs less," said Gary Rogliano, MAXjet chief executive. "It's the low-cost, Southwest kind of model, only for trans-Atlantic business class."

He said the company explored other variations, such as offering all economy seats, but he said this plan to fly premium passengers on overseas flights seemed to be the most unique and highest-revenue producing. And until now, there has not been much discounter competition.

MAXjet is a private company, but Rogliano says it breaks even and could make a profit this summer. Business people make up about 70 percent of the passengers, and the rest are vacationers, he said. About 15 percent to 20 percent normally travel economy class when they fly overseas.

The airline plans to add flights from other U.S. cities to London in the next two years.

On a recent flight from Dulles, the plane had 38 passengers who waited for boarding in a designated lounge, where snacks and computer hookups were available.

Once they settled into their wide leather recliners on the plane, passengers were served hors d'oeuvres by an army of flight attendants dressed smartly in gray pinstripes and scarves. They were offered portable TVs and DVD players with their choice of entertainment.

Davis, the Des Moines traveler, said a MAXjet agent called her a few days before her flight to check on her.

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