Under the Radar
By Bill Saporito/Paris
Marc Rochet, CEO of the Two-Jet, all-business-class Newark--Paris airline L'Avion, will tell you exactly why his company is only 1 of 4 such start-ups to have survived this catastrophic year for air travel: "Because we weren't stupid." Survival, though, comes at a price. The company's parent, Elysair, was bought last month by British Airway's new OpenSkies subsidiary for $108 million, as the two firms try to stake out a future in the deregulating but oil-shocked global marketplace.
L'Avion's lesson is about the critical choices that every new company has to make as it moves forward. Choose wrong, and you're dead. Case in point: at New Jersey's Newark Liberty International Airport, L'Avion is moving into the cushy lounge once occupied by the defunct Silverjet--a hermit crab occupying an empty shell. Rochet notes that L'Avion will pay a lower rent than Silverjet did and will share the facility to further defray costs. That will be quite an improvement over L'Avion's current lounge, a curtained-off part of the waiting area near the gate. It's a joke, to be blunt.
L'Avion could not afford mistakes in selecting airports, aircraft, service, frills and price. Says Rochet: "We debated hours and hours about the product. We came to two conclusions: Don't do crazy things. Silverjet had a private terminal in Luton airport in London. How can you afford a private terminal when you start with one flight a day?" The other was value for money. "Our value proposition since Day One was that we were offering all business class for a very reasonable price," he says.
Vive la differentiation. L'Avion's current fare range is $1,600 to $2,200 vs. Delta/Air France/Continental's $4,900-to-$9,330 business-class range. The difference in the service is at the margins. You will be plied with drink the moment you set foot on Delta or Air France, your seat will lie nearly flat, your frequent-flyer account will be fattened. You will also share the jet with about 200 people sitting in coach. At least you can feel superior to them.
L'Avion won't cosset you as much, but passengers are willing to trade off overflowing cocktails before takeoff and the frequent-flyer miles they can't use easily anyway to save $3,000 to $7,000. Most important, the seats are just as roomy as the majors' and recline 140 degrees. You can sleep comfortably. Since there are only 90 seats on the flight, boarding is less chaotic. There is no frequent-flyer program, says Rochet, because it would cost 8% of revenues. "Sometimes in industry, we need to choose. Do you put fuel onboard or do an ffp? We think fuel is better."
The three dead biz airlines--Eos, MAXjet and Silverjet--plied the London--New York route at prices that were steeply discounted too. It's a logical city pairing given the business traffic between the two financial centers. But American Airlines and British Airways were not about to cede their most profitable passengers. For instance, American, which has been brutal about picking off start-ups, began to fly to Stansted, MAXjet's London hub. Soon after MAXjet croaked, American yanked the flight.
L'Avion looked for shelter from the competition by getting slots at Paris' Orly airport, which are hard to come by, and by going for a higher proportion of leisure travelers, who might be lured from coach by the price and the prospect of not being treated like over-the-pond scum. Delta and Air France counterpunched with a J.F.K.--Orly flight, but it didn't last because too many of their passengers connect out of Charles de Gaulle, the bigger, better Paris airport.
The choice of aircraft proved crucial too. Silverjet and MAXjet used 767s; L'Avion, the smaller 757. Both jets can fly transatlantic, but the 767 is 30 tons heavier at takeoff. When fuel prices jumped, that difference was fatal. "Why choose an airliner with 30 extra tons of metal?" asks Rochet.
Rochet thinks L'Avion caught passen gers pivoting in their buying habits. Businesses are eyeballing travel costs, and Web-enabled leisure travelers are booking L'Avion to Paris, say, then flying coach to Prague on a cheapie Euroliner. L'Avion will operate separately from OpenSkies in its violet-colored jets for now. It added a code-share flight with OpenSkies from J.F.K. to Paris, which gives L'Avion access to BA's passengers, while BA gets a jump start for its new discount airline. L'Avion may have lost its independence but not its business. This year, that's saying something.